by If you’re among the 19 million people who asked the IRS for six more months to file their 2022 taxes, time is almost up.
Nearly 1 in 8 taxpayers requested an extension to file their taxes this year, according to data from the IRS, which expects a total of about 160 million tax returns to be filed in 2022. While most Americans file their returns before the traditional April 15 deadline , people who needed more time could receive automatically another 6 months from the tax office in order to arrange their records.
This year, the tax extension deadline for filing the 2021 return is October 17, rather than the standard date of October 15, because the 15th falls on a Saturday. However, while this gives taxpayers a little more breathing room, experts recommend filing as soon as possible to avoid last-minute pitfalls. They also suggest sending your return electronically, once the tax office has done so fight dynamic with the processing paper returns during the pandemic.
“I would encourage people to apply as soon as they are ready to do so and not wait until the last possible moment,” Eric Bronenkand, Betterment’s head of tax, told CBS MoneyWatch. “Using e-filing options can make people’s lives easier than sending in a paper tax return.”
Typically, about 1 in 10 taxpayers ask for an extension, but this year there may have been a jump in requests for extra time due to the ongoing pandemic and the complexity of a tax year that included the enhanced child tax credit and other tax changes.
End date of the tax extension
If you filed a Form 4868 before this April’s tax deadline, you received an automatic six-month extension to file your taxes. As mentioned above, the extended deadline this year is October 17th.
However, if you underpaid your taxes and owe money to the IRS, those payments were actually due in April. (Typically, the tax filing deadline is April 15th, but in 2022 taxpayers had until April 18th to file and register with the IRS because the 15th fell on Emancipation Day, which is celebrated as a holiday in Washington, DC)
In other words, download extension to file your taxes don’t give you an extension payment Theirs.
What if I owe the IRS?
If you didn’t know you had to pay the IRS by April 18, you’ll likely face a “failure to pay” penalty. The same will happen if you paid the IRS in April but miscalculated and still owe more.
The IRS says the penalty for these cases is 0.5% of the unpaid taxes for each month or part of a month that the tax remains unpaid. The penalty is limited to 25% of your unpaid taxes.
Take a taxpayer who failed to pay $1,000 in taxes owed by the April 18 deadline. In that case, the taxpayer will face penalties of $30 for not paying — $5 or 0.5% of $1,000 per month during the six months between April 18 and October 17 of the extended filing deadline.
But the IRS also charges interest on penalties — and the tax agency just raised that rate to 6 percent on Oct. 1 from 5 percent previously.
Can I still contribute to my pension fund?
This depends on whether you have a SEP IRA, which stands for “simplified employee pension” (or SEP) individual retirement account.
These are commonly used by the self-employed, but are also common among small business owners. Under IRS rules, people with SEP IRA accounts can contribute to their accounts until the due date for filing their federal income tax return for the year, meaning those who requested an extension have until Oct. 17 to get some money.
This can help self-employed or small business workers save money and lower their taxable income for the 2021 tax year. However, the deadlines for contributing to IRA and 401(k) accounts have passed for individuals filing the their 2021 tax returns through an extension.
What if I don’t apply by October 17th?
Those who fail to file their return by the extended tax deadline will face stiffer penalties. The IRS charges 5% of unpaid taxes for each month a tax return is late — or 10 times the underpayment penalty. Limits the penalty to 25% of your unpaid taxes. The tax office also charges interest on the fine.
Do disaster victims have more time to apply?
Yes, the IRS is giving more time to file for people who have been victims of recent natural disasters:
- Hurricane Ian victims living in Florida who have a valid extension to file their tax returns until October 17th now have until February 15th to file their tax returns.
- Victims of the storms and flooding that began Sept. 15 in parts of Alaska and who had also requested an October extension now have until Feb. 15 to file their statements.
- Likewise, victims of Hurricane Fiona in Puerto Rico who had tax filing extensions now have until February 15 to file their 2021 returns.
