Yes, there are downsides to filing a tax extension, primarily that it only grants more time to file paperwork, not to pay owed taxes. You must still pay estimated taxes by the April deadline to avoid interest and penalties. Other downsides include delayed refunds, potential for lingering stress, and possible errors on the application.
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.
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.
Filing a tax extension is not a bad thing. There is no penalty for filing a tax extension.
It's a valuable tool to manage your time, reduce stress, and ensure your return is accurate. And remember: tax filing extensions do NOT increase your audit risk. As long as you pay any taxes owed by the original deadline and file your return by the extended deadline, you're in good shape.
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.
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.
Although you don't need to submit a lot of information to e-file an extension, it could be rejected if you enter any details incorrectly. One example of these errors might be a typo in one of your numbers, such as a date of birth or Social Security number.
Do I Need to File an Extension If I Don't Owe? If you are due a refund, you do not need to file an extension. The IRS allows up to three years from the original filing deadline to submit your return and claim your refund.
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%.
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.
You lose a job, you have to move, you get sick, there's death in the family. These are the reasons you should ask for an extension.
The processing time depends on how your extension request is submitted. Here's what you can expect: Form 8809 (E-file) and 15397 (Fax): Typically processed within 24–48 hours. Form 8809 (Paper): Usually processed within 2–3 business days.
Try to communicate your commitment to the project when you ask for an extension. Explain that you need another day to make sure the product will meet the client's standards, you are waiting on materials to complete the job accurately or that you are going to work overtime to meet the new deadline.
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.
❌ 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.
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