Heads Up! If You Filed for a Tax Extension, Your Tax Returns Are Due ASAP

If you asked for a tax extension in 2023, you're certainly not alone. The IRS estimates that 19 million taxpayers asked for an extension in a recent year and it's likely that a similar number will do the same this year.

While it might not feel like nearly six months have already passed since Tax Day, that is indeed the case. We're just a few weeks away from the extended tax deadline, so here's what you need to know about the deadline and what you should do if you end up owing more than you expect.

The 2023 extended tax deadline

If you filed for a tax extension, you have six extra months to file your federal tax return. In most years, the regular tax filing deadline is April 15, which makes the extended deadline Oct. 15.

However, in 2023, Oct. 15 falls on a Sunday, so the extended filing deadline is pushed to Monday. Therefore, the extended tax filing deadline is Oct. 16, 2023.

It's worth noting that if you file taxes electronically, your return must be submitted by midnight on the deadline. And if you mail in a paper return (or a paper check to pay a balance), your return must be mailed by the deadline -- it's okay if it arrives a few days after as long as it's postmarked on time.

What to do if you owe money

It's important to know that a tax extension gives you more time to file your tax return, not more time to pay what you owe. At the time you submitted your extension request, you were asked to estimate your tax liability and pay that amount along with the extension.

Having said that, the penalties for failure to pay the IRS are significantly lighter than the penalties for failing to file your tax return by the deadline. If you owe the IRS money, you'll pay 0.5% of the unpaid balance until it's paid back, but if you don't file a tax return at all by the (extended) tax deadline, you'll pay 5% of any unpaid balance. Both penalties are capped at 25% of the unpaid amount, but the monthly penalty for not filing is 10 times worse than the penalty for not paying what you owe the IRS.

So, if you file your tax return by the extended deadline and end up owing a balance you cannot pay in total, it's still very important to finish and submit your return. Even if you're still waiting on documentation for a deduction or credit, you can go ahead and file your tax return without it and file an amended return later when you have what you need.

If you can't pay the entire amount you owe -- or anything at all -- here are the steps you should take:

• First, if you can make a partial payment, go ahead and pay what you can. Interest and penalties are assessed on unpaid balances, so making a partial payment can make a big difference in the long run.
• Second, consider enrolling in a payment plan with the IRS. A payment plan doesn't stop interest and penalties from accumulating, but it does give you more time to pay your taxes. You can divide your balance among a series of monthly payments you can afford. Alternatively, you could consider a personal loan to pay your debt to the IRS and avoid penalties altogether.
• Third, make sure that you don't end up in the same situation next year. Consider adjusting your estimated tax payments, or modifying your budget in order to make sure you don't get caught off guard by an unexpectedly large tax bill.

The bottom line is that a tax extension can buy some much-needed time for American taxpayers, but we're rapidly approaching the final deadline. By knowing what to do (and what not to do) in the event that you owe more than you expect, you'll be in a position to pay as little interest and penalties as possible and keep your hassle to a minimum.