The deadline to file federal tax returns for the year ending December 31, 2021 is April 18, 2022. The United States Internal Revenue Service (IRS) is easing back from the measures implemented during the COVID-19 pandemic, which means that we are largely returning to traditional schedules in terms of filing dates, deadlines, and extensions. The middle of April is when tax filing deadlines usually fall; there are no extraordinary postponements in 2022 to apply for coronavirus relief credits, which means that the extended due date of October 15 can be requested by means of filing IRS Form 4868, also known as the Application for Automatic Extension to File Individual Income Tax Return.

Form 4868 to Extend Your Tax Filing Deadline

Filing your tax returns after the April 18 deadline this year may result in a couple of penalties imposed by the IRS. The first penalty is related to the failure to file a return on time; the second penalty is triggered by any taxes you may owe, which will invariably accrue IRS interest until they are satisfied. Generally speaking, the late filing penalty is greater than the fees you will have to pay along with the overdue tax debt, but this depends on how much is owed. 

IRS Late Filing Penalties and Interest

Marking the IRS tax filing deadline on your calendar is one of the most important steps in the tax filing process, and we will show you why with a couple of scenarios below. April 18 is a day of action; it is your last chance to either submit your tax return or take advantage of Form 4868 for an extension. If for some reason you did not mark Tax Day on your calendar and missed both the submission deadline and the filing of Form 4868, there is still a chance that you will not face penalties, but only if you are owed a refund.

Let’s see what could happen to a taxpayer who finds out she owes $1,000 to the IRS but does not have the cash on hand by the April 18 deadline. This is an administrative assistant who was pleasantly surprised to receive handsome performance bonuses at her job in 2021, but she did not adjust her Form W-4 Employee’s Withholding Certificate, thus resulting in the $1,000 owed in taxes. On the last day to file, she submits Form 4868 in order to give her time to consult a tax preparation professional and figure out how to avoid owing taxes in the future if she continues to earn performance bonuses.

  • Taxes owed: $1,000
  • Date tax return filed: October 15
  • Date taxes are paid: October 15
  • Penalty for late filing: $0
  • Penalty for late payment: $30
  • IRS interest: $19.61

We will now look at the situation of a freelance web designer whose income was reported to the IRS by means of various Form 1099-MISC submissions by her clients. This taxpayer started working from home in 2021 but did not remit any quarterly payments to the IRS because she doesn’t know how to. Learning about the $1,000 tax debt was an unpleasant surprise for this freelancer, who unfortunately was not aware of the free tax filing extension granted by Form 4868.

  • Taxes owed: $1,000
  • Date tax return filed: October 15
  • Date taxes are paid: October 15
  • Penalty for late filing: $435
  • Penalty for late payment: $30
  • IRS interest: $28.15

The difference between the two scenarios above is significant. The administrative assistant who filed Form 4868 on April 18 will only have to pay $1,049.61 when she submits her Form 1040 tax returns on October 15. The freelancer who failed to request a filing extension is staring at a payment of $1,493.15 by the time she gets everything done by October 15. Avoiding the late filing penalty is at the heart of submitting Form 4868; you do not to start off with a 4.5% penalty that increases by 5% on a monthly basis until it finally settles at 25%.

It is clear that filing your tax returns on time is the best financial strategy, particularly if you are able to pay all the taxes you owe by April 18, but this may not always be possible. If you have doubts or questions about your tax returns, or if you are concerned about the amount of taxes you owe, the best course of action would be to file Form 4868, get the automatic benefit of a filing extension, and consult a tax preparation firm.

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