Is There a Penalty for Filing a Tax Extension? Key Insights Explained

Every year, the number of people who pay taxes increases. With this comes an increase in people who file their taxes late. Meeting the due dates or deadlines can be challenging, especially when a lot is on your plate. However, missing the deadline to file taxes could cost you.

If you missed the filing deadline, depending on how you missed it, you could still pay your tax. However, you may be charged extra fines and fees. Those are your failure to file penalty fees.

Did you miss the deadline? Need more time to prepare and file your tax return? Then, don't miss the opportunity to file for a tax extension. Fill out an IRS tax extension form - IRS Form 4868. This gives you six additional months to file taxes.

Definition of a tax extension

A tax extension is a formal request for additional time to file a tax return with the IRS, typically granting an extra six months. However, it’s important to note that a tax extension delays only the filing deadline, not the payment due date. Taxpayers must still pay any taxes owed by the original filing deadline to avoid penalties and interest.

Benefits of filing a tax extension

Filing a tax extension can be beneficial, especially if you need more time to prepare an accurate return. Here are several benefits of requesting an extended deadline:

• Filing a tax extension can help you avoid a late-filing penalty.
• It gives you extra time to gather tax documents or complete your tax return.
• You can use this extra time to make elections and decisions about your tax return.

How tax extensions work

If you anticipate owing taxes, estimate your bill and pay by the original tax deadline to avoid penalties and interest. Paying at least 90% of your estimated tax liability can help minimize late-payment penalties. Tools like Form 1040-ES and tax software can assist in calculating your tax liability.

Filing a Tax Extension: Key Deadlines

Federal tax extension deadline

The deadline to request a tax extension for 2024 federal tax returns is April 15, 2025. Failure to file by this date can lead to penalties.

State tax extension deadlines

State tax extension rules vary. Some states require additional forms, while others grant extensions automatically if a federal extension is filed. Check your state’s tax authority website for specific extension requirements.

Automatic tax extensions

Certain taxpayers qualify for an automatic extension without submitting a formal request. These include:

• U.S. citizens and residents living and working abroad on the tax filing deadline (automatic two-month extension).
• Military personnel serving in combat zones.

Reasons to File a Tax Extension

Filing a tax extension can give individuals and businesses valuable extra time to prepare and submit their returns for the tax year.

Reduce late penalties

Filing an extension can help avoid:

• The failure-to-file penalty, which is higher than the late-payment penalty.
• Additional penalties will be applied if you file your return late without an extension.

Preserve your tax refund

Filing an extension can help ensure you don’t miss out on claiming a refund. Keep in mind:

• The IRS allows you to claim refunds within three years of the original filing deadline.
• Refund claims are forfeited after three years.

Take extra time to make elections

A tax return involves several critical financial decisions. When you request an extension, you'll get:

• More time to gather necessary tax information.
• The ability to consult with a tax professional for guidance.

How to File a Tax Extension

Online options

You can request a free tax extension by:

• E-filing Form 4868 through the IRS website.
• Making an estimated tax payment by the deadline also serves as an extension request.

Software options

• Tax software can also support filing Form 4868 for tax extensions.
• You can apply for a tax extension on paper by filling out Form 4868 and sending it to the IRS through the Postal Service.

Cost of filing a tax extension

Filing a tax extension is free when done through IRS Free File or tax software. However, to avoid failure to file penalty fees, submit the request by April 15.

Penalties and Consequences

Penalty for late filing and payment

The IRS imposes two key penalties:

• Failure-to-file penalty: 5% of unpaid taxes per month. If you file more than 60 days late, your minimum failure-to-file penalty will be 100% of your unpaid taxes or $510 (whichever is less).
• Failure-to-pay penalty: 0.5% per month on unpaid taxes (up to 25%).

What happens if you don’t file a federal tax extension?

If you miss both the extension and return deadlines:

• File your tax return as soon as possible to minimize penalties.
• You cannot request an extension after Tax Day, but you can still file a late return with the Internal Revenue Service.

Eligibility and How to Request for First-Time Penalty Abatement

You may qualify for penalty relief if you have a good compliance history. You must:

• Have filed and paid on time for the past three years.
• Work with a tax professional to apply for penalty abatement if eligible.

Extension to File vs. Extension to Pay

Understanding the difference

Many taxpayers mistakenly believe that filing a tax extension also extends their time to pay. However, these are two separate deadlines:

• An extension to file (Form 4868) gives you extra time to submit your tax return, usually an additional six months.
• An extension to pay does not exist—your tax liability is still due by the original tax deadline, typically April 15.

IRS Approval and Notification

Is approval for a tax extension usually automatic?

Most extension requests are automatically approved if filed correctly. The IRS does not require an explanation for requesting an extension.

How to know whether your tax extension was accepted

Using tax software or an e-filing service ensures confirmation once your extension is processed.

Tax Refund and Extension

Will filing a tax extension delay your refund?

Yes, the IRS will not process your refund until you submit your tax return.

How to preserve your tax refund

If you expect a refund, file your tax return immediately to receive your money without delay.

Tax Preparation and Extensions

How filing an extension can reduce your tax preparation fees

Some tax preparers and software providers charge higher fees close to the deadline. Filing an extension can help you save by scheduling tax prep during less busy periods.

Common misconceptions about tax extensions

Filing an extension because you owe taxes and can’t pay them is not a valid reason, as it only gives you extra time to file, not extra time to pay.

Final Tips and Reminders

Important deadlines and penalties to keep in mind

• The federal tax deadline for 2024 is April 15, 2025.
• Late-payment penalties apply if you owe taxes and do not pay by the filing deadline.

How to avoid common mistakes when filing a tax extension

• Double-check your form for errors before submitting your tax return.
• Pay at least 90% of your estimated tax bill to minimize penalties.

Conclusion

Summary of key points

Filing a tax extension:

• Helps avoid late-filing penalties.
• Provides extra time to complete your return.
• Does not extend the deadline for tax payments.
• Is usually automatically approved if properly submitted.

Do you want to know how to file for an extension online? You can do it through the IRS or use a user-friendly platform like e.file-tax.

Using e.file-tax to file an extension request is quick and easy. We take pride in offering transparent and straightforward pricing for our services, distinguishing ourselves from TaxSlayer and TurboTax.

Don’t wait—act now to avoid unnecessary penalties!

Start filing your tax extension today with e.file-tax!