As we all know, April 15 is the deadline to file Individual Income Tax return for the previous year. More than 75 million taxpayers have already submitted their returns, but the IRS is still waiting for about 149 million people to file. If you cannot meet the April 15 deadline you will have to apply for an extension, which is automatically granted by the IRS upon receipt of the completed form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.
Filing an extension allows you to send your Income Tax return after the deadline, but no later than by October 15, 2014 (for US citizens or residents who live in the US), and by June 16, 2014 (for those who reside outside of the country but have US tax obligations). It is important to understand that this extension is only applied to the late filing, and does not allow any late payments for 2013 Individual Income Tax return. Therefore, the best thing to do is to estimate how much tax you might owe for 2013 and send a payment to the IRS before April 15, 2014.
If the IRS does not receive your payment before April 15, your tax liability will be increased by interest and penalty for the late payment, which starts from 0.5% of any tax due amount that was not paid by April 15, and increases on a monthly basis until it reaches 25%. Although the IRS might forgive this type of penalty if a taxpayer can show a reasonable cause for not making a payment, it is still a good idea to make all payments on time.
If you cannot make a payment, and don’t have a good reason that the IRS might take into consideration to abate your late payment penalty, you should at least apply for an extension to file, because the IRS penalty for the late filing is higher that a penalty for the late payment. It starts from 5% of any unpaid tax and goes up until the whole amount is paid in full. In addition, in some cases it might be more difficult to show a reasonable case for not filing your returns than for not being able to make a payment on time.