Tax day is almost here. Need more time to file or pay? Don’t panic.
Taxpayers have less than a week to meet this year’s May 17 deadline, after the IRS pushed the deadline to file federal income taxes back a month from the usual April 15.
But pandemic aside, millions of taxpayers request more time to file every year — more than 15 million people requested an extension for their 2019 tax returns, according to data from the IRS. If you receive an extension, the deadline to file remains unchanged this year at Oct. 15. Important caveat: getting that extra few months to file your tax return doesn’t grant you an extension to pay your taxes. If you owe money and don’t pay the full amount by May 17, penalties and interest will begin to accrue on May 18.
If you can’t pay the amount you owe at once, the worst thing you can do is ignore it, says Wendy Barlin, a certified public accountant and owner of About Profit. “You don’t want to ignore the IRS.”
You have options. Here’s what you need to know about getting more time to file or pay your taxes.
How to file for an extension
If you need more time to file your taxes, make sure to ask for it. You can file a Form 4868 through your accountant, tax software like TurboTax or via the IRS website, or request an extension when you make a payment to the IRS.
Don’t avoid filing your return because you know you owe money that you can’t afford to pay. You should still file a return or file for an extension by May 17 so you don’t face what the IRS calls a failure-to-file penalty, which is 5% of the unpaid taxes for each month or part of a month that a return is late, up to 25% of your unpaid taxes.
Meeting the May 17 deadline may be tight, but if you have the documents you need and can do an honest filing now, Barlin recommends doing so.
“There is no value in extending if nothing is going to change for you between now and October when the final deadline arrives,” she adds.
The agency has several options to help you file and prepare your taxes for free online. And keep in mind that the deadline to file your state taxes may be different from the deadline to file your federal taxes. You can check out Money’s breakdown of the state fling deadlines.
How to get more time to pay your tax bill
Again, filing for an extension doesn’t mean you have until October 15 to pay any taxes you owe. But if you can’t pay your full tax bill by May 17, you have options.
You can set up an online payment plan with the IRS to pay off your outstanding balance over time with penalties and interest. Depending on your eligibility, you can set up a a short-term payment plan in which you pay back your balance in 180 days or less, or a long-term payment plan in which you pay monthly. While a short-term payment plan doesn’t have any setup fees, a long-term payment plan has a $31 online setup fee if you pay through automatic withdrawals and a $149 setup fee if your payments are not automated (both those fees are higher if you set up your account via phone, mail or in-person). Low-income taxpayers can have the fee reduced, reimbursed or waived.
Cari Weston, director for Tax Practice & Ethics with the American Institute of CPAs, always recommends automating the payments because — not only do you not face the extra fee — but you also don’t want to risk missing a payment. She says her clients have forgotten to make the payment or have had checks lost in the mail, and the IRS has kicked them into collection activity, which can include seizing wages or property.
“You really don’t want to promise the IRS something and then not follow through,” Weston adds.
So she recommends not overextending yourself when setting up your payment plan. If you think it will take you four years to pay, give yourself five. If you pay rent on the first day of every month and have a lean wallet until half way through the month, make your monthly payments on the 20th. If you think you can pay $200 a month, commit to $100 for automatic withdrawals — you can always make extra payments, she says.
If you don’t know how much you can commit to or you’re facing an undue hardship, you can also call the IRS and ask them to put a collection hold on your account. The agency will ordinarily give you at least four to six weeks, Weston says. Make sure you document the number you call, the date and time of your call and the ID number of the representative.
And if you pay the IRS too much? Don’t worry. The agency will return the money it owes you as a refund, which generally takes around three weeks, according to H&R Block.