Understanding Tax Extensions and Estimated Tax Payments
Tax season can be stressful, and sometimes even the most organized people need a little extra time. That’s where tax extensions come in. But it’s important to understand what an extension does (and doesn’t) do to avoid any surprises down the road.
In This Blog We’ll Cover:
- Who Qualifies for a Tax Extension?
- Extension vs. Estimated Tax Payment: What’s the Difference?
- Key Takeaways to Avoid Penalties
Anyone Can File for an Extension
That’s right! In general, anyone can file for a tax extension. This gives you an additional six months to file your return, pushing the deadline from April 15th to October 15th of the following year.
Here’s the Key: A tax extension grants you more time to file your return, but it does not grant you more time to pay any taxes you owe.
Check out our new blog — How to File IRS Tax Extension Form 4868?
Understanding Estimated Taxes
Estimated taxes are quarterly payments made throughout the year to cover your income tax liability. These are especially important for self-employed individuals and those with income sources outside of a traditional paycheck (like freelance work or investments).
The Crucial Difference
Filing an extension simply buys you more time to file the paperwork for your return. It does not impact your estimated tax payments or the actual taxes you owe. If you owe taxes, you’re still responsible for paying them by the original April 15th deadline, or you may face penalties and interest charges.
Key Takeaways to Avoid Penalties
- File an extension if you need more time to file your return, but don’t forget about your estimated tax payments.
- Estimate your tax liability accurately and make your quarterly payments by the deadlines to avoid penalties.
- If you’re unsure about your estimated tax obligation, consult with a tax professional.
Remember, a tax extension is a helpful tool, but it’s not a free pass on your tax bill. By understanding the difference between extensions and estimated taxes, you can ensure a smoother tax season and avoid any unwanted surprises from the IRS.
