Please ensure Javascript is enabled for purposes of website accessibility

Got a Tax Extension? You'd Better Get Moving on Your Return

By Maurie Backman - Oct 2, 2017 at 7:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you missed the April tax filing deadline, now's your chance to avoid being late a second time around.

Maybe you filed a tax extension back in April because you were missing some of the paperwork needed to accurately complete your return. Or maybe you just plain procrastinated to the point where you had no chance of submitting your return by the original deadline.

No matter why you requested that tax extension, let this serve as your firm but friendly warning: You only have until Oct. 16 of this year to file your 2016 tax return, and if you fail to adhere to that deadline, you could face some serious consequences.

Tax form with calculator, money, and post-it reading "Tax time!"

Image source: Getty Images.

Don't be late to the game again

There are plenty of valid reasons for filing a tax extension. For example, if you come to realize that your tax situation is more complicated than expected, and you can't find a professional tax preparer in time, then you're better off asking for an extension and filing an accurate return. Otherwise, you risk getting audited and enduring the stress that comes with it. But even if you filed that extension from a place of responsibility, as opposed to pure laziness, you still need to get your paperwork ready in time for the upcoming Oct. 16 deadline if you owe the IRS money.

That's right -- if you don't owe the IRS any money, then there's no real penalty for not submitting your return on time. Keep in mind, however, that if you're due a refund, any delay in filing will only cause you to wait even longer for the cash that's rightfully yours.

Let's talk about the consequences of missing the tax extension deadline if you do owe money. Basically, it's the same as being late for the original deadline -- you'll face a late filing penalty equal to 5% of the tax you owe per month, up to a maximum of 25%. That's far worse than the penalty for simply being late with your tax payment.

Person typing on a laptop with papers, a pen, glasses, and a calculator on hand

Image source: Getty Images.

Remember, if you underpaid your taxes during the year, an extension won't give you a grace period for repaying your tax debt. Rather, you'll still be charged interest that begins to accrue once the April deadline has passed. But in that scenario, you'll only be charged 0.5% of what you owe per month, not 5%.

And that's precisely why it pays to get moving on your tax return as soon as possible, even if you technically have a couple of weeks before the official extension deadline. For one thing, if it turns out you do owe money, you'll have an opportunity to start paying off that balance sooner, thus shaving off a bit of interest. But more than that, it'll help you avoid the dreaded late filing penalty.

One more thing to keep in mind, regardless of whether you owe money or are due a refund, is that if you fail to submit your tax return by Oct. 16, you'll lose the opportunity to do so electronically. So while you won't get penalized for filing your return in, say, November, if you're owed money, you'll have no choice but to submit a paper return, which not only increases your likelihood of making an error, but could delay your refund even further. You're therefore much better off sticking to that deadline -- and then pledging to get ahead of your taxes next year, so you're not facing the same scenario a second time around.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
317%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.