September 19, 2024

October 15, 2024, Extension: What You Need to Know Now

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Article Highlights:

The October 15, 2024, Extension Deadline
No Additional Extensions
Giving this Office Time to Finish the Return
Late Filing Penalties
Late Payment Penalties
Interest on Unpaid Taxes
What Happens if the Return Is Not Filed by October 15?
Steps to Take if You Cannot File by October 15

As the October 15, 2024, tax extension deadline for filing 2023 returns approaches, millions of taxpayers who sought additional time to file their returns are now facing the final countdown. This article aims to provide a comprehensive guide on what this deadline means, the implications of missing it, and the penalties associated with late filing and late payment of unpaid tax. Understanding these aspects can help you avoid unnecessary financial strain and ensure compliance with IRS regulations.

The October 15, 2024, Extension Deadline - The IRS allows taxpayers to request an automatic six-month extension to file their tax returns, moving the deadline from April 15 to October 15. This extension is granted by filing IRS Form 4868 by the original April deadline. While this extension provides additional time to complete and submit your tax return, it does not extend the time to pay any taxes owed.

No Additional Extensions - It is crucial to understand that the October 15 deadline is final. The IRS does not offer any further extensions beyond this date. If you have not filed your 2023 return by October 15, you will be subject to penalties and interest on any unpaid taxes. Therefore, it is imperative to use this time wisely to gather all necessary documents and complete your return.

Giving This Office Time to Finish the Return - If you have enlisted the help of this office to prepare your return, the extension period is an excellent opportunity to ensure that your return is accurate and complete. This office faces a high volume of clients as the deadline approaches. By providing all necessary documents and information as early as possible, you can help avoid the last-minute rush and potential errors.

Late Filing Penalties - Failing to file your tax return by the October 15 deadline can result in significant penalties. The IRS imposes a late filing penalty of 5% of the unpaid taxes for each month or part of a month that the return is late, up to a maximum of 25%. For example, if you owe $1,000 in taxes and file your return two months late, you will incur a penalty of $100 (5% of $1,000 for each month).

Late Payment Penalties - In addition to the late filing penalty, the IRS also imposes a late payment penalty. This penalty is 0.5% of the unpaid taxes for each month or part of a month that the taxes remain unpaid, up to a maximum of 25%. The late payment penalty starts accruing from the original April 15 deadline, not the October 15 extension deadline. Therefore, even if you file your return by October 15, you will still incur a late payment penalty if you did not pay your taxes by April 15.

Interest on Unpaid Taxes - The IRS charges interest on any unpaid taxes from the original due date (April 15) until the date the taxes are paid in full. The interest rate is determined quarterly and is the federal short-term rate plus 3%. For example, for the quarter ending Sept. 30, 2024, the rate is 8%. Interest compounds daily, which means the longer you wait to pay your taxes, the more interest you will accrue.

What Happens if the Return Is Not Filed by October 15?

If you fail to file your 2023 tax return by the October 15 deadline, you will face both late filing and late payment penalties, as well as interest on any unpaid taxes. Additionally, the IRS may take further action to collect the taxes owed. Here are some potential consequences:

Notice of Failure to File: The IRS will send you a notice indicating that you have failed to file your tax return. This notice will include the penalties and interest that have accrued.
Substitute for Return (SFR): If you do not file your return, the IRS may file a substitute return on your behalf. This return will not include any deductions or credits you may be eligible for, resulting in a higher tax liability.
Collection Actions: The IRS has various tools at its disposal to collect unpaid taxes, including wage garnishments, bank account levies, and liens on your property. These actions can have severe financial consequences and damage your credit score.
Loss of Refund: If you are due a refund and do not file your return within three years of the original due date, you forfeit your right to the refund. For example, if you are due a refund for the 2023 tax year and do not file your return by April 15, 2027, you will lose the refund.
Criminal Charges: In extreme cases, failure to file a tax return can result in criminal charges. While this is rare, it is a possibility for those who willfully evade their tax obligations.

Steps to Take if You Cannot File by October 15 - If you find yourself unable to file your 2023 tax return by the October 15 deadline, there are steps you can take to mitigate the consequences:

File as Soon as Possible: Even if you cannot file by October 15, file your return as soon as you can. The sooner you file, the lower your late filing penalty will be.

Pay What You Can: If you cannot pay your entire tax liability, file the return anyway and pay as much as you can to reduce the late payment penalty and interest. You can also set up a payment plan with the IRS to pay the remaining balance over time. Contact this office for assistance.

If you are facing financial hardship, we can communicate with the IRS. They may offer options such as an Offer in Compromise, which allows you to settle your tax debt for less than the full amount owed.

Please contact this office if you are unable to accumulate all the information needed to complete your return so we can discuss alternatives.