If you're among the many 19 million individuals who requested the IRS for an additional six months to file their taxes in 2022, time is sort of up.
Virtually 1 in 8 taxpayers requested for an extension to file their taxes this yr, in line with knowledge from the IRS, which expects a complete of about 160 million tax returns to be filed in 2022. Whereas most Individuals file their returns earlier than the standard April 15 deadline, individuals who wanted extra time had been capable of robotically obtain one other 6 months from the tax company with the intention to get their information so as.
This yr, the tax extension deadline for submitting your 2021 return is October 17, slightly than the standard date of October 15, as a result of the fifteenth falls on a Saturday. But whereas that provides taxpayers slightly extra respiratory room, consultants advocate submitting as quickly as doable with the intention to keep away from last-minute pitfalls. Additionally they advocate sending your return electronically, because the IRS has struggled mightily with processing paper returns throughout the pandemic.
"I might encourage folks to file as quickly as they're prepared to take action and to not wait till the final doable second," Eric Bronnenkant, head of tax at Betterment, advised CBS MoneyWatch. "Utilizing the digital submitting choices could make folks's lives simpler than mailing in paper tax returns."
Sometimes, about 1 in 10 taxpayers asks for an extension, however this yr might have seen a bounce in requests for additional time due to the continued pandemic and the complexity of a tax yr that included the improved Youngster Tax Credit score and different tax modifications.
Tax extension due date
Should you crammed out a Kind 4868 earlier than this yr's April tax deadline, you obtained an automated six-month extension to file your taxes. As talked about above, the prolonged deadline this yr is October 17.
Nevertheless, should you underpaid your taxes and owe cash to the IRS, these funds had been truly due in April. (Sometimes, the tax submitting deadline is April 15, however in 2022 taxpayers had till April 18 to file and settle up with the IRS as a result of the fifteenth fell on Emancipation Day, which is noticed as a vacation in Washington, D.C.)
In different phrases, receiving an extension to file your taxes would not provide you with an extension to pay the IRS.
What if I owe the IRS?
Should you did not know you needed to pay the IRS by April 18, you'll doubtless face a "failure to pay" penalty. The identical will happen should you paid the IRS in April however did not estimate accurately and nonetheless owe extra.
The IRS says the penalty for these conditions is 0.5% of the unpaid taxes for every month or a part of a month the tax stays unpaid. The penalty is capped at 25% of your unpaid taxes.
Take a taxpayer who didn't pay $1,000 in taxes that they owed by the April 18 deadline. On this case, the taxpayer will face $30 in penalties for the non-payment — $5, or 0.5% of the $1,000, per thirty days throughout the six months between April 18 and the October 17 prolonged submitting deadline.
However the IRS additionally expenses curiosity on penalties — and the tax company simply raised that charge to six% on October 1 from 5% beforehand.
Can I nonetheless contribute to my retirement fund?
That relies upon whether or not you've a SEP IRA account, which stands for a "simplified worker pension" (or SEP) particular person retirement account.
These are usually utilized by self-employed people, however are additionally frequent amongst small enterprise homeowners. Below IRS guidelines, folks with SEP IRA accounts can contribute to their accounts till the due date for submitting their federal earnings tax return for the yr, which implies individuals who requested for an extension have till October 17 to sock away some cash.
That may assist self-employed employees or small enterprise staff each get monetary savings and decrease their taxable earnings for the 2021 tax yr. Nevertheless, the deadlines for contributing to IRA and 401(ok) accounts have handed for folks submitting their 2021 tax returns through an extension.
What if I do not file by October 17?
Individuals who fail to file their return by the prolonged tax deadline will face harsher penalties. The IRS expenses 5% of the unpaid taxes for every month that a tax return is late — or 10 instances greater than the underpayment penalty. It caps the penalty at 25% of your unpaid taxes. The tax company additionally expenses curiosity on the penalty.
Do catastrophe victims get extra time to file?
Sure, the IRS is giving extra time to file for people who find themselves victims of latest pure disasters:
- Hurricane Ian victims who dwell in Florida and have a legitimate extension to file their tax returns by October 17 now have till February 15 to file their tax returns.
- Victims of storms and flooding that began on September 15 in components of Alaska and who had additionally requested for an October extension now have till February 15 to file their returns.
- Likewise, Hurricane Fiona victims in Puerto Rico who had a tax submitting extension now have till February 15 to file their 2021 returns.