Ask Better Questions: Navigating the October 15th Tax Deadline with Confidence

October 15th is the tax filing deadline for those who filed for an extension back in April. As this date approaches, there are steps you can take to ensure your tax filing goes smoothly and to possibly decrease your tax bill. 

When used properly, tax extensions can be an excellent resource for individuals and businesses, but it's important to understand how they work and what happens if you miss the deadline.  

How do Tax Extensions Work?

A tax extension allows you to defer filing until October 15th, giving you more time to gather information and fill out forms. However, this filing extension does not apply to tax payments. You’ll still need to pay what you owe, or as close of an estimate as possible, by the original April 15th deadline. 

By the October deadline, you’ll need to have your taxes filed and any remaining tax bills paid, or you could be hit with severe tax penalties. 

What Are the Reasons for Filing an Extension?

An extension may not give you extra time to pay your bill, but it can give you a much-needed reprieve for gathering all of your tax documents together. 

While the IRS will not ask you to specify a reason for requesting an extension, here are a few scenarios where requesting an extension may be helpful. 

1. Missing or inaccurate tax forms 

2. Unexpected emergencies

3. Natural disasters 

4. Avoid late filing fees 

5. Adjust retirement contributions

6. Travel away from home during tax season

7. Maximizing your deductions and credits

Regardless of why you file for an extension, extension requests must be submitted to the IRS by April 15th.

What Are Automatic Extensions?

In certain situations, you may automatically get an extension applied to your taxes without needing to file. Or, you may get potential penalty fees waived. Specific scenarios that grant you an automatic extension include

1. Residing outside the country - you will get an automatic 2-month extension

2. You are in the military, and your post is outside the U.S. - you will get an automatic 2-month extension

3. Deployed in a combat zone - up to 6-month automatic extension starting from the date you return home

4. Live in an area affected by a natural disaster - automatic extensions can last from 2 months to 6+ months

What Are State Extensions?

When you apply (or are automatically given) an extension on your federal taxes, you may not necessarily also be provided with an extension to file your state taxes. 

Most states automatically apply a federal extension to your state taxes, but this is not always true. Some states require you to file a state extension separately. All states (that impose a  state income tax) will require you to pay your tax bill by the original tax deadline.  

Retirement Contributions with a Tax Extension

An extension can give you extra time to fix certain retirement account issues. The biggest one is excess IRA contributions. 

If, for instance, you find that you have contributed more than the annual limit to your 401k, you can avoid hefty penalties by requesting a disbursement to get you back under the threshold for that year. 

For small business owners or self-employed, a tax extension gives you extra time to contribute to your or your employees' retirement accounts. You can then use these contributions to potentially reduce your tax bill. 

What if You’re Still Not Ready to File?

When October 15th is fast approaching, and you still aren’t ready to file your taxes, is there anything you can do? 

Can You File a Second Extension?

In most cases, you cannot file any extension besides the already generous six-month tax filing extension. However, in certain limited cases, you can get extra time. 

• U.S. citizens living outside the U.S. - the IRS allows a further extension for those who need more time to meet the qualifications for the Foreign Earned Income Exclusion.

• Military service - if your combat deployment is extended or you are injured and hospitalized outside the country, your extension will be lengthened.

• Natural disasters - if a natural disaster occurred during the extension period, the IRS may automatically extend the filing deadline. Check the Tax Relief page for more info. 

• Undue hardship - if you can prove hardship, the IRS may waive the majority of penalties and fees owed once you file.

What if You Don’t File or Pay?

If you don’t file and pay your taxes, the amount you owe will start growing as you are hit with penalty and interest charges. 

For not filing, you’ll get hit with a failure to file penalty. This penalty accrues at 5% of your taxes owed each month, starting from April 15th. The minimum on this penalty is $485 and can grow to up to 25% of your unpaid tax bill. 

If you also fail to pay enough of your taxes by April 15th, you’ll get hit with the failure to pay penalty of 0.5% a month on your tax bill. This can grow to 1% a month once the IRS sends an intent to levy notice. Your unpaid tax bill will also start accruing interest charges on top of the penalties. 

If you continue ignoring your taxes, the U.S. government can garnish your wages, issue a federal tax lien, seize your assets, and even revoke your passport.

If you need more time to pay, you can set up a payment plan with the IRS, which will lower your penalty charges. 

Can I Receive a Refund?

If you don’t file your taxes and are owed a refund, there will be zero penalties or interest charges. Still, you should consider filing as soon as possible, as you only have three years from the original April 15th deadline to claim your refund before it is forfeit. And you won’t earn interest by waiting.

The Aligned Perspective: Navigating the October 15th Tax Deadline

Planning for and filing your taxes can be complicated. You need to ensure your return is accurate and that you’ve taken advantage of all the deductions and credits you can claim. Filing an extension can help give you more time to file, but it won’t help you with your tax bill. 

A good tax preparation service or CPA is indispensable at tax time, but a financial advisor can be a great addition if you really want to get ahead on your tax prep. With expert help and guidance from an experienced financial advisor, you can maximize your deductions and credits throughout the year and plan ahead for paying your tax bill. 
Tax time is often stressful enough, so why not let a financial advisor take on some of the tax planning burden?

Simple, strategic, and designed to give you clarity as you grow.