Reason #10 to File a Tax Extension: There’s No Penalty

tax-etension-penaltyTax Extension Center continues its series of The Top 100 Reasons to File a Tax Extension. This series is intended to show taxpayers that a tax extension is valuable because it saves individuals and/or their businesses time, stress, and even money.

Wow, we’ve already reach #10! And without further ado, here’s our newest reason to file a tax extension: there’s no penalty to filing an extension.

[All of you football fans out there will finally get the link between the picture of the penalty flag and this post. A better picture actually would have been one of a ref waiving off a penalty. If someone out there has one, let me know.]

I digress…the point to remember is that if you owe money to the IRS and file a tax extension on time, you will avoid a penalty. If you owe money to the IRS and don’t file an extension, then don’t be surprised if the IRS has issues with that (meaning they might not pick up the yellow flag).

How much is the penalty? The late payment penalty is usually 0.5% of unpaid taxes, assessed per month. For example, if you have $2,000 of unpaid taxes, the IRS may charge you $10 per month as a late payment penalty: $2,000 x 0.5% = $10.

Whether you are new to tax extensions or you file one every year, remember that filing a tax extension does not give you more time to pay what you owe the government or face the possibility of penalties and interest. You still need to make your payment by midnight on April 15.

Ever file a tax extension? Thinking about filing one this year? Drop me a note in the comment section below.

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