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.
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.
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.