If you do not owe taxes and are not expecting a refund, you are generally not required to file an extension or a return. However, filing an extension (Form 4868) is recommended to avoid potential issues if you discover you owe money later, and it provides extra time to gather documents.
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.
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.
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.
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.
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.
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.
If you need more time to file your taxes, request an extension by the April tax filing due date. This gives you until October 15 to file without penalties.
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.
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.
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%.
Even if filed on time, some tax extension requests are rejected on or after the deadline. You'll get a notice from the IRS if your extension request is denied.
One-time forgiveness, officially known as First-Time Penalty Abatement (FTA), is an IRS program that allows qualified taxpayers to have certain penalties removed from their tax accounts.
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.
The IRS does not check every tax return. It does not check the majority of them, but the IRS implements methods that track certain factors that would result in a further examination or audit by them.
Not reporting all of your income is an easy-to-avoid red flag that can lead to an audit. Taking excessive business tax deductions and mixing business and personal expenses can lead to an audit. The IRS mostly audits tax returns of those earning more than $200,000 and corporations with more than $10 million in assets.
How to request a free extension to file for a return with no tax due. Individual taxpayers, regardless of income, can use IRS Free File at IRS.gov/freefile to request an automatic six-month tax-filing extension.
In this rush, the option to file for a tax extension is often seen as a last resort, the taxpayer has a lingering concern that it might raise red flags with the IRS or cause future tax problems. However, these worries are largely unfounded.
You can avoid a penalty by filing and paying your tax by the due date. If you can't do so, you can apply for an extension of time to file or a payment plan.
Walter Anderson, an entrepreneur and billionaire, was convicted of the largest tax evasion case in American history. At the time of his conviction, he owed the United States government nearly a quarter of a billion dollars in back taxes. Perhaps the most notorious tax evasion scandal of all is that of Al Capone.