VIDEO: How Filing a Tax Extension Can Save You Money
An IRS approved tax extension provides you with extra time to file, but not extra time to pay any tax balance due. That doesn't mean, however, that a tax extension won't save you money.
There are up to 3 penalties you could face by not paying what you owe the IRS on time (which is April 15 for most individuals). The most significant of those is the IRS Late Filing Penalty, which can be avoided by filing for a tax extension.
Here is a simple explanation of the different payment penalties.
IRS Late Filing Penalty
This penalty will be applied to any balance due to the IRS if you do not file your taxes, or a tax extension, on time.
Fee: 5% monthly penalty of any outstanding balance due to the IRS. You can
avoid the late filing penalty by filing for a tax extension with
FileLater.
Example: For each $1,000 you owe the IRS, the late filing penalty is $50 per month.
IRS Late Payment Penalty
This penalty will be applied to any unpaid balance due to the IRS, regardless of whether your taxes are filed on time.
Fee: 0.5% monthly penalty of any outstanding balance due to the IRS. You can avoid the late filing penalty by filing for a tax extension with FileLater.
Example: For each $1,000 you owe the IRS, the late filing penalty is $5 per month.
IRS Interest
The IRS will apply interest to any unpaid balance due to them, regardless of whether your taxes are filed on time.
Fee: The IRS interest rate for taxes due varies between 5-8% per year, and is 4% for the second quarter of 2009.
Example: For each $1,000 you owe the IRS, interest will cost you $3-5 per month.
Here'a short video with more information about how a tax extension saves you money:
If you are unable to pay your tax balance on time, you can avoid the costly IRS Late Filing Penalty by filing for a tax extension with FileLater.
FileLater provides a secure online solution for individuals and businesses seeking to e-file an IRS income tax extension. FileLater is an authorized IRS e-file