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Next Monday, May 17, marks the deadline for 2020’s extended tax season. That’s your last day to file and pay any 2020 federal income taxes owed. If you haven’t filed yet, or did file your return but haven’t paid your balance, now is the time to take action.
But don’t panic if you’re still unprepared: the IRS has options to further extend your filing deadline, plus payment plans available to those without enough cash to pay their balance in full before the deadline.
How to File a Tax Extension
First things first: If you are able to file and pay your taxes owed by May 17, do it.
You can complete your tax return and submit payment online via the IRS’ Free File service, which is available to filers whose income is $72,000 or below. If you’re ineligible for Free File, you can use an online third-party service such as TurboTax or H&R Block, or submit your return by mail, as long as it’s postmarked by May 17.
If you need more time to file, request an extension from the IRS to delay your due date until Oct. 15, 2021. Anyone can apply for an automatic extension by filing Form 4868 through the IRS Free File Program.
Keep in mind: This is a filing extension only. If you owe the IRS money, you’re still obligated to pay by May 17. Any taxes you owe after May 17 will be subject to interest, which accrues daily, as well as monthly penalties.
Learn more about penalties and interest on the IRS website.
Tax Day is the deadline for federal income taxes. Many states also extended their tax deadline to May 17, but check your individual state tax agency’s site for more information on your state income tax obligation.
What To Do If You Owe Taxes
When you file your extension, you’ll need to include an estimate of your taxes owed on the form, which can help you determine the payment amount you should submit when filing. Use last year’s tax return, along with your W-2 and forms for other income sources (such as 1099s) to estimate.
The IRS offers a tax calculator to help you figure out your total tax obligation using your pay statements most recent tax return. To determine what you still owe, subtract any amount you’ve already paid toward taxes.
If you submit your estimated payment through IRS Direct Pay and indicate that the payment is for an extension, the IRS will automatically count your payment as an extension, even if you haven’t filed Form 4868.
If you don’t have the money to pay what you owe in full right now, any amount that you are able to contribute can help reduce the penalties and interest you’ll be charged in the future.
“If you are in a tough spot and don’t know if you’ll owe because you haven’t had a chance to get your documents together, the best thing to do is to file an extension with both the IRS and your state and make an extension payment — that way you’ll avoid penalties,” says Ally-Jane Ayers, CFP, co-founder and financial planner at Brooklyn FI.
For further flexibility, take time to apply for a short-term payment plan or long-term installment agreement with the IRS to spread your balance out over time with a lower monthly payment.
If you decide to use a payment plan, complete the application today. You can apply for a plan online and receive immediate notification of whether you’ve been approved.
What To Do If You Expect a Refund
Even if you don’t owe any money to the IRS, you should still make sure your return is filed by the deadline to receive your refund — and any stimulus money you’re owed — as quickly as possible.
Still, prepare to be patient: The IRS continues to face processing delays (especially if you file by mail) due to its large backlog and implementation of last-minute tax changes. Earlier this year, the IRS issued a list of best practices and common errors to avoid, which you can use to ensure your return is processed and refund issued as quickly as possible.
After you file, you can check the status of your refund using the Where’s My Refund tool on the IRS website.
Act quickly to file and pay your taxes owed by next week’s deadline, but remember to approach your situation with a clear head and know the facts, Ayers says: “Stay calm and lean on the IRS website for help.”
Take time today to develop your action plan. Go ahead and file your return and pay online if you’re able; otherwise, file for an extension until Oct. 15, pay what you can of your estimated balance, and apply for a payment plan if necessary.