Everything You Need To Know About Filing A Tax Extension (2021)
Although the IRS extended the tax deadline to May 17th this year for individuals, Tax Day is still April 15th for businesses. If you find that you still need more time to file, Taurus CPA Solutions has answers to all your tax extension questions.
How Do I File A Tax Extension?
To file an extension as an individual, fill out IRS Form 4868. Businesses use IRS Form 7004 to file. You can fill this form out on paper and mail it in, or complete it electronically. Most tax software allows you to fill the forms out directly in the program. The form is short and should be quick to fill out; but make sure you read and thoroughly follow the instructions.
What is the Tax Extension Deadline?
If you need an extension, you must file for one before May 17th as an individual. Tax extensions give individuals an additional six months to file their tax returns, making your new tax deadline October 15th. The deadline for filing an extension as a business varies depending on the type of business.
An extension gives you more time to file your taxes, but it does not mean more time to pay your taxes. You must still pay your taxes by the due date (May 17).
Is There a Penalty for Filing a Tax Extension?
There are no penalties for filing a tax extension. If you don’t pay or file your taxes on time, even after the extension, then there will be penalties assessed.
What are the Penalties for Not Filing Taxes On Time?
If you miss the original Tax Day deadline to file and you owe taxes, you will be penalized. Every month you don’t file your taxes, you’ll owe an additional 5% of what you owe – up to 25%. If you miss the tax deadline and are expecting a refund, you won’t get your money until you file. The IRS will hold your money for up to three years.
What Happens If I File My Taxes But Don’t Pay Them?
The penalty for not paying is less drastic than not filing taxes. If you do not have the funds to pay all your taxes on time, penalties will be 0.5% of what you owe – up to 25%.
You must also pay the IRS interest for each day you don’t pay your taxes. Interest continues to accrue until you pay the entire bill.
Why Should I File a Tax Extension?
There are many reasons that people file for extensions, just one being to avoid receiving a “failure to file” penalty.
If you are missing forms like a W-2 from employers or a 1099 from clients, then it is important to file an extension while you retrieve those forms. Sometimes unexpected events happen in your life. An extension gives you time to sort things out and provides extra time to file.
Businesses and individuals that fail to plan for taxes often end up with penalties and large amounts owed. Taurus CPA Solutions works to prepare your taxes properly and timely.
If you would like to learn more about how Taurus CPA Solutions can help you with tax planning and preparing, please contact us today.