Understanding the Differences between File Extensions and Pay Extensions

While the terms “Extension to File” and “Extension to Pay” may seem related, they mean two different things and should not be confused with each other. Failing to understand the difference between the two may result in stiff penalties. To avoid paying unnecessary fines, here is a breakdown of the difference between an extension to file and an extension to pay:

What Is an Extension to File?

An extension to file taxes is when you ask for additional time to submit your tax return. This extension can be granted by the Internal Revenue Service (IRS) or the state's taxation department. When approved, this extension allows you to file your tax return up to six months after the original filing deadline. 

To request an extension, you must fill out IRS Form 4868 or the equivalent of your state's department of taxation. It's important to note that this only gives you more time to file, not pay your taxes. If you owe taxes, you must still pay them by the deadline, or you may be subject to late payment penalties and interest. 

If you need more time to file your taxes, an extension to file taxes can provide some relief. It's important to remember that you must still pay your taxes by the original deadline or risk being subject to penalties and interest. So take a few extra minutes to complete the necessary forms and pay your taxes on time.

If someone cannot pay their taxes, they should file an extension, even if they cannot pay the total amount. Filing an extension will help reduce the penalties they will face. If you don't file an extension, the penalties will be much higher than if you file and can't pay. The penalty for not filing is typically 5% of the total amount owed each month, up to 25%, while the penalty for not paying is only 0.5% of the amount owed each month.

What Is Extension to Pay?

To request an extension to pay, taxpayers must submit a request to the IRS. This request should include the taxpayer's name, address, Social Security Number, and the tax year for which the extension is requested. The request should also explain why the taxpayer cannot fulfill their taxes in full by the original due date. The IRS will then review the request and determine whether or not to grant an extension to pay. 

If an extension to pay is granted, taxpayers will be given an additional period to pay their taxes. However, it is essential to note that any interest and penalties that apply to the taxes owed will still be assessed. It is also important to note that an extension to pay is not an extension to file. Taxpayers must still file their taxes by the original due date, even if an extension to pay is granted. 

Conclusion

Remember that tax filing and tax payments have two different deadlines that you need to meet. Asking for an extension to file only extends the deadline for filing, not the date of payment, and vice versa. As a rule, always file and pay your taxes on time. If you must file an extension, it's best to file on time and request an extension to pay if you cannot pay the taxes owed. This way, you can avoid paying heftier fines and other unnecessary fees connected to a failure to file taxes.

Never miss a tax filing and payment deadline again by hiring Hawk Tax Solutions. Let our bookkeeping services handle everything from income taxes to payroll so that you can continue to spend time on the things that matter. Contact us today to book an appointment.