The main downside to a tax extension is that it only extends the time to file, not to pay; you still owe any taxes due by the original April deadline and will face penalties and interest if you don't pay, plus you'll wait longer for any refund, and it can encourage procrastination. An extension doesn't delay other deadlines like IRA contributions or state taxes, and errors on the extension form can cause denial.
An extension gives you extra time to file, but not extra time to pay. After you file an extension, if you owe taxes when you file your return, you might also have to pay penalties and interest on the tax due.
Filing a tax extension is not a bad thing. There is no penalty for filing a tax extension.
Your taxes don't affect your credit scores in any way. However, taking out a loan or credit card to pay your taxes can impact your credit scores.
For those who are terrified of extensions, remember that they're okay. Unless you file for extensions for years and years, they're not going to increase your chance of being audited, and they won't have any consequences if you pay your taxes on time.
❌ False. Filing an extension does not increase your chances of being audited. The IRS selects returns for audits using a variety of methods, including: Discriminant Information Function (DIF): This computerized system scores returns based on various factors, with higher scores more likely to trigger an audit.
The biggest tax mistakes people make include filing late, math errors, incorrect personal info (like Social Security numbers), forgetting deductions/credits (like EITC), misreporting income, not signing forms, and making errors with bank details for direct deposit, all leading to delays, penalties, or missed savings, with using tax software or professionals helping avoid these common pitfalls.
Cons of filing a tax extension
According to the IRS, as of 2023, the interest rate is currently 7% compounded daily. Plus, the late payment penalty is 0.5% per month, which maxes out at 25%.
The 2-2-2 credit rule is a guideline for building strong credit, suggesting you should have two active credit accounts (like cards or loans) for at least two years, with consistent on-time payments for those two years, often with a minimum credit limit of $2,000 per account, to demonstrate financial responsibility to lenders, especially for mortgages. It's a benchmark to show you can handle credit well over time, reducing lender risk and improving approval odds for major loans.
If you file taxes after the October 15 extension deadline, the IRS will assess penalties and interest, primarily a failure-to-file penalty (5% per month, max 25%), plus a separate failure-to-pay penalty (0.5% per month) and daily interest on the unpaid taxes, though you can request penalty abatement for reasonable cause like natural disasters. The October deadline is for filing, not paying; if you owe, payment was due in April, so you'll likely face both penalties and interest until you file and pay, but you won't be penalized if you're due a refund.
If you use software to file an extension online, you'll get confirmation that your extension was accepted. The IRS does not confirm extension requests sent by U.S. mail or an authorized private delivery service. But they will notify you if they deny your extension.
However, the IRS does grant you an automatic extension to file your taxes every year, as long as you complete Form 4868. Common reasons for requesting an extension include a lack of organization, unanticipated events or tax planning purposes.
Filing a tax extension can give you valuable time to finalize your return, maximize deductions, and ensure accuracy. However, it doesn't exempt you from paying your taxes on time. To avoid penalties and unnecessary costs: Pay at least 90% of your estimated tax liability by April 15.
a fire, flood or theft prevented you from completing your tax return. postal delays that you could not have predicted. delays related to a disability or mental illness you have.
If you miss the October extended tax filing deadline, you'll have failure-to-file penalties that are retroactive to your original filing date (typically October 15) and, potentially, failure-to-pay penalties retroactive to the original payment due date (typically April 15) if you still owe taxes.
With a 700 credit score (considered "Good"), you're well-positioned to get approved for most major loans like mortgages, auto loans, and personal loans with more competitive interest rates and terms than someone with a lower score, plus you'll qualify for better rewards credit cards and may even see lower insurance premiums. You can access a wide range of financial products, but to get the best rates, scores above 740-760 are often needed.
If you are residing or traveling abroad on April 15, California law allows you an additional two months to file your return. This extension, when combined with the automatic six-month paperless extension, extends the due date to December 15.