Here’s how to file for a tax extension

With the tax deadline just days away, taxpayers are hurrying to file their returns on time.

While most taxpayers will have already filed their returns to the Internal Revenue Service by the April 18 deadline, some may need some extra time — especially if they are still waiting on tax documents.

If you find yourself needing an extension, the IRS allows a six-month extension for taxpayers to file by Oct. 17, 2022. The extension also helps you avoid penalties and interest that come with failing to file on time.

“The reason people file extensions – probably the most common and valuable reason— is that you don’t have enough information. You’re waiting for some tax documents that you don’t have and you can’t really complete the precise filing of the returns,” Nancy DeRusso, managing director and head of financial wellness at Goldman Sachs Ayco Personal Financial Management, told Yahoo Money. “Fortunately, the IRS has tools to help taxpayers that need that additional time to file.”

If you need more time to file your 2021 tax return, here’s what you need to know.

‘An extension to file is not an extension to pay’

Taxpayers file extensions for various reasons – missing documents, waiting on corrections and more. What’s important to note is that an extension to file simply gives you more time to file your return. It does not extend how long you have to pay any taxes you owe the IRS.

According to the agency, you should estimate and pay any owed taxes by your regular deadline to help avoid penalties.

“If you can pay — even though you’d rather delay paying – you should pay,” DeRusso said. “The IRS has several programs like installment payments or ways to get an extension to pay. Otherwise you’re just going to get more penalties.”

If you’re unable to pay your taxes by the deadline, the IRS has several short-term and long-term payment plans you can apply to online.

“Some people file an extension thinking that they’re going to get an extension of time to pay their taxes – but that’s one of the things we want to demystify,” DeRusso said. “An extension to file is not an extension to pay.”

How to file an tax extension

If you need more time to file your tax return, you’ll have to request a tax extension through the IRS website before the tax deadline.

Individual taxpayers can use the IRS Free File tool to electronically request an automatic tax-filing extension. This is available for everyone regardless of income, however, the IRS will require you to estimate your tax liability on the form and pay any amount due to receive an extension.

Some companies that partner with the IRS Free File program, which allows you to file your federal return or extension for free, include TaxAct, TaxSlayer, FreeTaxUSA, FileYourTaxes.com, FreeTaxReturns.com INC, and Online Taxes at OLT.com.

According to the IRS, not everyone will have to file an extension request, members of the military serving abroad will receive an automatic extension without applying or filing a Form 4868.

One factor to keep in mind: the majority of taxpayers will have a deadline of April 18, but tax-filers in Maine and Massachusetts will be able to file until April 19.

The IRS has also identified several states and counties where the deadline was postponed due to natural disasters. Earlier this year, Kentucky experienced some storms and tornadoes, so the deadline was extended until May 16 in select counties. Similarly, folks that were victims of wildfires that began Dec. 30, 2021 in Colorado also have until May 16 to file their return. The same goes for residents of Decatur and Dyer counties of Tennessee.

“Taxpayers who have deadlines pushed forward due to natural disasters like in Kentucky who now have an initial filing deadline of May 16, 2022 also have until May 16 to file for an extension until October 17, 2022,” Eric Bronnenkant, CPA, CFP, head of tax at Betterment, told Yahoo Money. “However, they may have to file for an extension via paper if it is beyond April 18. I would encourage anyone who needs to file for an extension to do so as soon as possible.”

If you’re waiting on unprocessed returns or can’t pay – file anyway

Millions of American taxpayers are still waiting on last year’s tax returns to be processed, but that doesn’t mean they shouldn’t file their 2021 tax return.

Folks who haven’t had last year’s return processed yet should enter $0 for the 2020 AGI on their 2021 tax return to avoid a rejection when filing electronically, National Taxpayer Advocate Erin Collins, previously told Yahoo Money. Meanwhile, non-filers were told to put $1 for last year’s AGI on current returns.

A ‘failure to file’ will result in a 5% penalty of the unpaid taxes for each month (or portion of the month) that the tax return is late, but won’t surpass 25% of your unpaid taxes, according to the IRS.

Still, penalties can add up. For tax returns filed in 2020, 2021, and 2022, the minimum failure to file penalty is $435 for returns filed 60 days late — or 100% of the tax required to be shown on the return, if that is less than the $435 penalty.

“Taxpayers should still file this year's returns even if they are waiting on prior years’ taxes,” said DeRusso. “There is a way to check the status of your taxes with the IRS – you can call them and there are tools online [such as IRS Check My Refund]. So if it’s been a long time, there are delays at this point, you wouldn't want to stop filing your 2021 taxes and risk further delays.”

Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.

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