How to File for an Extension on Your Taxes
For the second year in a row, the federal government has extended the deadline to file your taxes. "This continues to be a tough time for many people, and the Internal Revenue Service (IRS) wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities," said IRS Commissioner Chuck Rettig in a statement. Though last year's April 15 tax deadline was extended into July, you won't have quite as much time this year. In 2021, individual taxpayers can postpone federal income tax payments for the 2020 tax year to May 17 without penalties and interest, regardless of the amount owed. (Note: For residents of Texas, Oklahoma, and Louisiana, the IRS has extended the tax deadline to June 15 due to winter storms.)
But what if that extra month or two isn't enough time? To avoid interest and penalties on taxes that begin to kick in if you breeze past that May 17 tax deadline, individual taxpayers can request a filing extension until October 15. But here's the catch: To get a tax extension, you must request one prior to tax day.
How do you file for an extension on your federal taxes?
There are three ways to make this type of request, says Colleen McCreary, chief people officer at Credit Karma. For the first, go to IRS.gov/payments and use IRS Direct Pay, the Electronic Federal Tax Payment System, or a credit card or debit card to pay all or part of your estimated federal income tax. Indicate that the payment is for an extension. If you do this, you don't need to file any additional forms. Your extension should be automatic, and you'll get a confirmation number for your records.
Secondly, you can e-file Form 4868, the Application for Automatic Extension of Time to File U.S. Individual Tax Return. Thirdly, you can complete and mail a paper Form 4868 and include payment for the estimated tax due. Remember to mail the form in plenty of time for the tax filing deadline.
What about state taxes?
If you also need more time to file your state tax return, it's important to recognize that the rules vary by state. Some states honor the federal extension and automatically grant you a state extension too, while others have separate requirements, says McCreary. "Be sure to check with your state to see what you need to do to get a state filing extension. You can usually find this information on a state tax website, or in the state's individual income tax instructions." Here is a list of state tax agencies that can provide that information.
Does it cost anything to file for a tax extension?
It doesn't cost you anything to request a filing extension, says McCreary. "What could cost you is if you fail to pay the taxes you owe by Tax Day," she explains. "If you file your tax return and you owe taxes, and don't pay by tax day, you'll pay a penalty of 0.5 percent of the unpaid taxes per month that they go unpaid, until you pay your taxes in full or until the total penalty amount reaches 25 percent of the taxes you owe. If you filed your return on time and you're on a payment plan, this late-payment penalty is reduced to 0.25 percent."
How long is a tax extension?
If you're granted a tax extension, you'll have until October 15 to file your tax return. It's important to note, though: Getting an extension doesn't give you more time to pay—just more time to file your tax return. Even if you're granted an extension, you still need to estimate your tax bill and pay as much of it as possible.
So, if you're considering asking for an extension because you feel like you can't deal with a tax bill right now, McCreary says the better option may be to file your tax return and request an installment agreement instead. This allows you to pay the tax owed in monthly increments until it's paid. Unfortunately, interest will still continue to accrue on any unpaid taxes until you make your last payment.