Tax Day is just around the corner. The Tax Deadline to file your 2022 taxes is April 18, 2023.
If you cannot complete your taxes by the tax filing deadline, you can request an automatic six-month extension to file your taxes. If you were wondering, the deadline to apply for a tax extension also falls on April 18.
There is some good news here for all you procrastinators (or people with complex tax-planning needs). Applying for a tax-filing extension could be one of the easiest parts of getting your taxes done. Reminder- you must actually file for an extension. You are not automatically given more time.
There is no shame in filing for a tax extension. I’m guessing some of you will procrastinate and wait until the night before taxes are due to gather your information (not recommended). As a Certified Financial Planner who does a ton of proactive tax planning, I work with many clients who own businesses and have more complicated tax situations. Even when everything is organized and given to their tax experts early, they often end up filing on an extension.
The reality is that the more complex your tax situation is, the more likely you are to need a tax extension. Some of you may not even have a choice. You may still be waiting on tax forms like 1099s or k-1s. For those who own businesses or are self-employed, you may be filing tax returns for your business and yourself as an individual. The good news is this also brings with it many more opportunities for proactive tax planning, not to mention tax-saving retirement plans like Solo 401(k)s or even Cash Balance Pension Plans, which can potentially save you tens to hundreds of thousands of dollars in taxes each year.
If you are running late, it is better to file for an extension than make a mistake on your tax … [+]
What Does Tax Filing Extension Mean?
It is important to note that an extension only applies to an additional time frame to file your taxes. You will still need to pay any taxes owed to the government by April 18. If you cannot pay your taxes in full, the IRS may be willing to offer a payment plan.
How You Can Easily File for A Tax Extension
Go to the IRS website and fill out IRS form 4868. You can access this form directly at this link and file it yourself. Also, it is free. If you are working with a paid tax preparer or CPA, they will likely take care of this for you but confirm it has been filed. Form 4868 will only apply to your federal tax extension. Many states will also require you to file for an extension directly with them. I won’t be listing each state’s requirements here, so take a second and check with your state tax authority to see what form they need to file an extension, if any.
For all the do-it-yourself tax preparers, tax software like Turbo Tax should have the option to file for an extension within their tax filing software. If you are in the middle of filing with them, this may be an easier way to file for a tax extension. If not, you can use the IRS form listed above.
You will have to answer a few short questions to file for an extension. The big ones are Estimated Taxes Owed and the approximate amount of taxes paid already. Beyond that, receiving a tax extension is basically an automatic process. You will not be required to provide an excuse to file late. Your tax extension filing should be granted if you fill in the form completely and correctly. With a tax extension, you will have an extra six months to file. That means your new deadline to file your 2022 taxes will be October 16, 2023. Please don’t procrastinate again until October 15 to begin filing. The later you file, the more likely you will make costly tax mistakes. Tax mistakes can bring a dreaded IRS audit or leave you paying more taxes than you are legally obligated to do.
There are costly penalties for not filing and paying your taxes on time.
What Happens When You Don’t File A Tax Extension?
The IRS likes to pile on penalties and interest to taxpayers who don’t meet their deadlines. The late filing penalty is five percent per month on any unpaid taxes. This caps out at 25 percent of unpaid taxes. For those who file on time but forget to pay on time, you will get slapped with a failure to pay a penalty of 0.5 percent of unpaid taxes per month. This will continue until you are up to date.
When Is The 2023 Tax Filing Deadline In California?
For most California counties, the IRS and California Franchise Tax Board extended the federal and state tax deadline to October 16, 2023. This means residents have about six more months to file their returns and make any necessary tax payments.
Related: California Tax Planning Tips For Business Owners