With the 2022 tax season extension deadline fast approaching, those with approved extensions are going to have to file a return or face some stiff penalties.
In addition to filing a tax return before the October 17th 2022 deadline, a big question for those tax filers is when they will get their refund or potentially know their final tax liability.
Given the ongoing IRS processing delays, those filing extensions and expecting a refund will likely see longer than usual delays in getting their refund payment. Expect up to 3 months.
Start filing your tax extension for free with TurboTax, Tax Act or E-file
I’ve filed by extension deadline, but where is my refund?
You can go online or call the IRS to check the status of your tax refund 24 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return.
Processing will take place based on IRS processing cycles and you can see an estimated refund payment chart here.
I strongly recommend you try getting your refund or tax liability status online or via your free IRS transcript, as many tax filers have found it to be a nightmare to get a hold of a live IRS agent for questions around their refund payment or revised tax assessment.
If you owe more taxes after the IRS processes your return, you will be sent a notice with any tax adjustments and methods to make the payment (see section below on IRS installment plans) or to file an appeal.
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How to file a tax extension
The IRS says it received requests for over 15 million extensions, which amounts to about 8% of all tax returns. Taxpayers who ask for an extension generally get an extra six months to file from the end of the regular tax season.
You can get some extra time without any hassle. Simply e-file for a Personal Tax Extension of your federal tax return – Form 4868 – using leading tax providers (e.g. TurboTax) or via the IRS free file application (regardless of income)
If you mail in your paper file return, your return is considered filed on time if the envelope is properly addressed to the IRS (see their website) and postmarked prior to the extension deadline.
Important things to remember when you request a filing extension
First, a federal extension does not automatically extend the deadline for your state income tax return. Also, an extension to file your federal taxes does not give you an extension to pay your actual tax bill.
You still have to figure out your taxes and make an estimated payment for potential liability (see next section).
Estimating how much money you’re going to owe can take time, so do not wait till the last minute until to get started. Last year’s tax return could be a good starting point if you haven’t experienced any major life changes.
If that is the case, you can probably pay the same amount in taxes for the current year that you paid in the past year.
Don’t ignore the IRS if filing late or you owe more than you can pay
The key to surviving last-minute tax filing is realizing that the IRS will not be ignored. These guys aren’t kidding around when they set deadlines.
The IRS wants your filing or extension request, and it wants it by the mandated deadline.
If you don’t file your return today and you owe taxes, you may owe an additional penalty for failure to file unless you can show reasonable cause. The assessment is 5 percent per month (or any part of a month, even just a day) of your balance due.
Even if you file on time but don’t pay what you owe, the IRS can charge you. This nonpayment penalty is one-half of 1 percent of the tax due each month, or any part of a month, that isn’t paid.
The fine continues until it reaches 25 percent of your late payment. If both penalties apply in any month, you get a small break on the failure-to-file penalty. The IRS will reduce it by what it’s charging you for not paying, making your potential maximum non-filing penalty “only” 22.5 percent.
IRS Installment plan
Hopefully by now you will realize that it is better to pay your taxes (even partially) rather than avoid them entirely. So if you are having trouble with finding the money to pay your taxes, consider an IRS monthly installment plan.
You even get to pick your monthly payment amount and the day it will be due. In fact, if you’ve previously filed — and paid — taxes on time, your tax bill is less than $10,000 and you convince the IRS that you can’t come up with that much all at once, the agency can’t turn down your request.
Your installment plan, however, must pay off the due tax in at least three years. To get the program going, attach Form 9465, Installment Agreement Request, to the front of your tax return. Your tax filing provider can help you with this or see the IRS website for more details.
Financially strapped taxpayers also can use an installment plan to make partial payments of tax liability.
Amending your tax return
Mistakes are common and a major cause for refund delays, but the key is fixing them as soon as you discover them.
If you find an error on your return, you can wait for the IRS to notify you or correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return.
However note that if you file an amended return after the filing extension cut-off date, you could be assessed additional interest and late filing penalties.
You will need to use the WMAR IRS tool to check the status of your amended refund processing
Exceptions to Extension Deadlines
There are some extensions to the IRS extended filing deadlines. For example those in the armed forces serving in a combat zone typically have 180 days after they leave the combat zone to file returns and pay any taxes due.
Also those tax filers living in areas covered by FEMA disaster declarations get IRS determined extensions to file their tax returns. E.g For those impacted by Hurricane Ian in 2022, have until February 15, 2023.