If you're like many people, you rush to file your taxes by the mid-April deadline. You aren't sure what happens if you don't get your postmark on that envelope by the designated date, but you don't want to find out. However, filing an extension isn't as difficult or expensive as you think. In fact, you may find that filling out one simple form buys you the extra time you need at no expense whatsoever.
How Do You File a Tax Extension 2018?
If you missed the tax deadline in 2018, it's too late to file an extension unless you've been out of the country. For future reference, you'll need to file an extension by Tax Day in order to buy the time you need. To file an extension, you use Form 4868. You will need to pay any taxes due when you send the form in to avoid penalties, so this might be the ideal option if you're fairly certain you'll be getting a refund. Although IRS extensions are well-publicized, many don't realize that states allow extensions, as well. In California, for instance, if you've filed for an IRS extension you'll get a six-month extension on your state income taxes. If you didn't file a federal extension, you can submit California Tax Form FTB 3519 to request more time.
Is There a Penalty for Filing a Tax Extension?
There is no charge to file the form to request an extension and, in most cases, it will be granted without question. The penalties come in if you do file your taxes six months later, only to find you owe money. If you didn't remit that money in April, you'll owe penalties. Yes, that may sound terrifying, but it's not life-altering unless you owe thousands of dollars. You'll pay penalties of 5 percent per month, plus interest. The IRS currently charges interest of 5 percent per year, compounded daily.
What Happens if You Owe Taxes and Can’t Pay?
In some instances, you may have filled out all the forms and be completely ready to submit your taxes, only to find you owe more money than you can afford to pay. The temptation might be to file an extension, but the IRS recommends filing your regular tax forms anyway. You should pay as much as you can reasonably afford to reduce the penalties and taxes you'll owe. It's important to note that if you file either your tax forms or an extension by the deadline but don't pay the full amount, you'll be penalized 5 percent per month on the amount due, up to a maximum of 25 percent. The IRS can waive penalties or even set up an installment agreement in some cases. To find out if this applies to you, contact the IRS at 1-800-829-1040.
How Long Can You Go Without Filing a Tax Return?
If you choose to just avoid the tax situation altogether, nobody's going to knock on your door just yet. In most cases, the IRS will file a substitute tax return, gathering information provided by your employer and other sources. This will avoid any deductions or dependents you might have claimed, so there likely will be errors that aren't in your favor. If you owe money from that substitute return, the first communication you'll have is a Notice of Tax Due and Demand for Payment, which is basically a bill from the IRS. Fail to pay that and you'll continue to accrue interest and penalties on that amount. If enough time passes, you'll eventually deal with legal action or worse.
Can You Go to Jail for Not Paying Your Taxes?
Although jail time is always a possibility, that course of action is geared more toward those who simply avoid paying taxes altogether year after year. If you don't have the money to pay, chances are you'll just deal with civil litigation, which basically means the IRS will take the matter to court and get a judgment against you. At worst, a lien will be placed on your house to force you into paying what you owe.
- IRS: Application for Automatic Extension of Time To File U.S. Individual Income Tax Return
- IRS: Tax extension rules by state
- The Motley Fool: 4 Tax Penalties to Avoid at All Costs
- USA Today: Here’s what you need to know about filing a tax extension in 2018
- IRS: What if I can’t pay my taxes?
- LegalZoom: What Are The Penalties For Not Filing Taxes?