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The extension deadline of October 16, 2023 (for 2022 tax returns) is rapidly approaching. The time to file is now!
If you’re still reading this, it’s possible you need a little extra information on how filing an extension might have affected your tax returns. If that’s not you, just jump right into your TurboTax account and finish up your tax returns.
For the rest of you, let’s first make sure there’s a clear understanding of what filing a tax extension really means - just so there aren’t any unexpected “taxing” surprises. Filing a tax extension is a great option if you need a little extra time to file your taxes. However, it’s only an extension of time to file your tax returns, not to pay any taxes owed.
If this is news to you, and you owe more taxes, you may end up paying underpayment penalties and interest. On top of that, if you didn’t timely file the extension form (Form 4868) or you miss the extension deadline, you may also end up owing late-filing (aka failure-to-file) penalties. Those failure-to-file penalties can add up to 25% of the tax due. Ouch!!
Don’t worry too much…just yet. It’s likely that if you aren’t already aware of these penalties you may be a first-time “offender”. The IRS is willing to help out if it’s your first offense or you have what they consider to be reasonable cause. And of course there are rules that you’ll want to read about to make sure you qualify for a penalty abatement.
Another reason to not worry about penalties (quite yet) is that the IRS gives you a couple more “outs” and doesn’t penalize you if certain criteria are met. For example, if you paid (either through withholding or quarterly estimates) at least 90% of the current tax liability you won’t be charged a penalty. You also won’t be charged one if your balance due is less than $1,000, or you paid 100% of the prior year’s tax liability (110% in the case of higher income taxpayers).
Confident you’re getting a refund? Then, it may not be a big deal if you don’t meet the extension filing deadline or even if you didn’t file the extension form. There are no penalties if you don’t owe more taxes. But, don’t procrastinate on filing for your refund. You have only three (3) years from the tax return due date to file and claim that refund. It’s the IRS’s way of saying “if you snooze, you lose” - and they’re happy to keep your hard-earned tax dollars if you don’t claim your refund within their timeline.
Still missing important tax documents? Did you forget to contact that brokerage firm or former employer to get your missing tax docs? No worries at all! There’s a good chance the IRS has some, or most, of that information already. In many cases, you can obtain Wage and Income Transcripts directly from the IRS website. You will have to create an account (if you don’t already have one) and go through a process to verify your identity. They won’t give your tax info to just anyone, after all!
If you need more details than what you can find in your IRS account, you should make every attempt to obtain it prior to filing your tax returns. If it’s not possible, file by the deadline anyway using the most accurate information you have available. This way you can avoid late-filing penalties. Once you have those final details or precious “missing” tax documents, you can amend your tax return.
Did you make a payment with your extension? Make sure you get credit for it on your tax return. This help article will show you how to enter it into TurboTax. And don’t forget to enter any quarterly estimated tax payments you made toward your 2022 tax return.
Now you’re ready and are going into the TurboTax software to finish up your tax return. Suddenly, you feel overwhelmed and can’t quite figure out what you already entered, or didn’t enter. If that’s frustrating you, it might be easier to simply clear your return and start over. There are restrictions to using that feature, so make sure you read the details on the linked help article. And, of course TurboTax Experts are here to help!
Pro Tip: Taxpayers in some areas of the country may have longer to file their tax returns. Sadly, this usually happens in areas in need of disaster relief, but it could be for other reasons as well. Take a look to see if there are further tax filing extensions in your location.
A few helpful links:
I filed an extension and made a payment. How do I get credit for it?
Where do I enter my estimated tax payments?
How do I clear and start over?
Guide to IRS Tax Penalties: How to Avoid or Reduce Them