If you do request a tax extension, don't be lulled into thinking that you can sit back and relax for six months. A filing extension also doesn't give security traders more time to make a mark-to-market election. After April 18, married couples can't file amended separate returns if they previously filed a joint return. It also doesn't delay the payment of estimated taxes, give you more time to contribute to an IRA or health savings account, or extend any of the other April 18 due dates. As mentioned earlier, you still have to pay any tax owed by the original due date. It buys you more time to file your return, but it doesn't help with other things. The tax return filing extension is very limited. Interest will be charged on the unpaid amount, too.Ĭon: You Don't Get More Time to Do Other Things If you file your return by its due date and request an installment agreement, the penalty goes down to 0.25% for any month in which an installment agreement is in effect. The penalty increases to 1% if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy property. The failure-to-pay penalty is 0.5% of the unpaid amount for each month, or part of a month, up to a maximum of 25%. You'll still be hit with other penalties if you don't pay any tax due by the April 18 deadline. So, if you owe taxes this year that you can't pay right now, requesting a tax extension will at least let you avoid (or lessen) late-filing fees, since the penalty won't start until after October 16. If your return is over 60 days late, there's also a minimum penalty for late filing – the lesser of $435 (for tax returns required to be filed in 2022) or 100% of the tax owed. However, the penalty won't exceed 25% of your unpaid taxes. The penalty for failing to file your return on time is 5% of any unpaid taxes for each month (or part of a month) that a tax return is late. However, walk away if a preparer bases his or her fee on a percentage of your tax refund - you don't want a preparer claiming questionable tax breaks on your return to inflate the fee. You might not get an exact price up front, but at least make sure you understand how the price is determined (e.g., a preparer might have a set fee for each form required, charge you by the hour, or start with a minimum fee and tack on additional costs depending on the complexity of your return). That's why it's important to get a quote before settling on a preparer. In general terms, prices for tax services can vary widely depending on several factors, including the complexity of your return, where you live, and the preparer's experience. That often translates into lower tax preparation fees, which you can take advantage of if you request a tax extension. However, things slow down for preparers in the fall. Tax preparers are busiest right before the tax filing deadline, so expect to pay premium prices if you want your return filed right before the due date. Pro: You Might Save on Tax Preparation Fees

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