7 Warnings About Filing a Tax Extension, According to Experts
An Extension Doesn’t Delay Your Payment
Filing a tax extension only gives you more time to file your return, not to pay any taxes owed. You must estimate and pay any taxes due by the regular deadline to avoid penalties and interest.
Penalties for Late Payment
Even with an extension, if you don’t pay the estimated tax owed by the original deadline, the IRS may charge late payment penalties
Interest Still Accrues on Unpaid Taxes
Interest on any unpaid taxes starts accruing from the original tax deadline. The longer you take to pay, the more you’ll owe in interest, which is typically compounded daily.
Missing the Extension Deadline
If you file an extension but fail to submit your tax return by the extended deadline (usually six months later), you could face hefty penalties,
State Taxes May Not Follow Federal Extension Rules
An IRS tax extension doesn’t always apply to state taxes. Some states require separate extension filings, and failing to do so could result in penalties or missed deadlines.
Potential for Audit Increases
Filing an extension can increase the chances of an audit if your return is filed hastily or incorrectly later.
– Refund Delays
If you are owed a refund, filing an extension will delay your ability to receive it. The sooner you file, the sooner you can get your refund.
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Complex Situations Can Get More Complicated
Extensions may complicate tax situations involving self-employment, investments, or multiple sources of income.