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tax filing extension

Missing a Filing Extension

January 29, 2016  |   Last modified on June 11, 2021

If you believe that you won’t be able to file your tax return on time, you should request an extension before the filing deadline. To file for an extension, use Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. After you file the form, you automatically receive 6 additional months to file. Businesses may use Form 7004 or Form 1138 to file for an extension.

Failure to File vs. Failure to Pay

An important point to remember is that filing for an extension does not mean getting an extension to pay taxes. Even if you file for an extension, you are required to pay your taxes before the filing deadline.

Failure to pay taxes on time attracts a penalty of 0.5% (1/2 of 1 percent) on the total unpaid taxes each month. You will not incur this penalty if you pay at least 90% of your taxes before the original filing deadline and pay the remaining balance before the extended filing due date.

Penalty for Failure to File

If you fail to file your return by the extended due date, you incur a penalty of 5%, up to a maximum of 25%. If you file your return more than 60 days after the extended due date, the minimum penalty is the smaller of $435 or 100% of the unpaid tax. If both failure-to-file and failure-to-pay penalties apply in a month, the greater of the two is applied, not both.

It is important to pay at least 90% of your tax liability before the original filing deadline to avoid tax debt. Before the extended deadline, you must have paid the entire amount in taxes and also filed your return.

Substitute for Return

The IRS files a substitute for return (SFR) for a taxpayer that fails to file a tax return. That is done to determine the taxpayer’s liability. After the SFR is filed, the IRS begins collection activity. Notices are sent for payment of back taxes once they’re assessed.

IRS Payment Options

Even if you can’t pay your entire tax bill or any part of it, you must still file your return. This will help you to avoid the failure-to-file penalty. You may then use an IRS payment plan such as Installment Agreement or Offer in Compromise to resolve back taxes. In the case of financial hardship, you may inform the IRS of your circumstances or seek help from a Volunteer Income Tax Assistance (VITA) center in your area.