Tax Day is typically April 15 each year unless the day falls on a holiday or weekend. The pandemic in 2021 caused the Treasury Department and Internal Revenue Service (IRS) to extend this date to May 17. But that isn’t the case for tax returns filed in 2022. For this year, the deadline to file your income tax is April 18, though you can file an extension for October 15.
Remember that even if you file an extension, if you owe money, you must make income tax payments by April 18, 2022 to avoid interest and penalties. The IRS requires that you estimate your tax liability for the tax year and pay it when filing for the extension or by the deadline.
It’s best to meet the IRS tax deadline to avoid any issues. You can also get a free extension to October 15. The extension gives you extra time to file, but keep in mind that you still must pay any owed taxes by April 18. There is no penalty if you don’t owe taxes; the IRS just keeps your refund for longer.
The IRS doesn’t penalize you for not filing a return, but it will penalize you for not paying your owed taxes. Interest and penalties apply if you don’t pay your expected tax amount on time. Late payment penalties start at 0.5% per month with a maximum of 25% of the amount due. If you failed to file for an extension, the penalty goes up to 5% per month with the same 25% maximum penalty.
Interest will also be owed on the outstanding balance. The IRS determines the interest rate using the federal short-term rate plus 3%. In 2021, the rate was about 5%.
To file for an extension, you’ll complete IRS Form 4868. This is for an automatic six-month extension on your taxes for those filing a Form 1040, 1040NR, or 1040NR-EZ. Many people make the mistake of filing for an extension because they can’t make the tax payment. As we’ve discussed, this strategy can lead to penalties and interest payments. However, if you owe and can’t pay all the taxes upfront, the IRS offers various payment plans to help you reduce penalties and interest on your taxes.
You should file a tax extension if you:
- Are owed a refund but can’t get your taxes done on time
- Can pay the estimated amount owed but need more time to file
- Are dealing with a life event such as a family death or divorce, and you need more time to gather documents for your return
- Run out of time to file because you were busy during tax season