WASHINGTON, DC (April 9, 2012) — The National Association of Enrolled Agents (NAEA) warns the taxpaying public that a common misconception about filing a tax extension is that it provides taxpayers additional time to pay what they owe IRS without any financial penalty. In fact, an extension to file should not be confused with an extension to pay. Taxpayers still need to send a check to the IRS by April 17 for an amount as close as possible to what they owe. If they are not able to pay in full, IRS will charge interest and late payment penalties. By paying what they can, taxpayers can at least reduce the amount charged for interest and penalties. The current interest rate is three percent per year, compounded daily, and the late payment penalty is normally 0.5 percent per month.
The good news is that by filing an extension, the taxpayer has an additional six months (until October 15, 2012) to complete and file the tax return without being charged a late-filing penalty. Also good news for those who don’t have the money to pay in full is that the newly-expanded "Fresh Start" initiative will allow certain taxpayers who have been unemployed for 30 days or longer to avoid paying penalties for failing to pay taxes. IRS has also greatly increased the number of taxpayers eligible for installment agreements by doubling the dollar threshold, and is working to make common-sense changes to the Offer in Compromise program.
The Free File link on the IRS website is a quick and easy way to apply for a filing extension. This free service can be used to automatically request an extension on filing from IRS.
About Enrolled Agents
Enrolled agents (EAs) are America’s tax experts. They are the only federally-licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. While attorneys and certified public accountants are also licensed, only enrolled agents specialize exclusively in taxes. Enrolled agents are required to complete many hours of continuing education each year to ensure they are up-to-date on the constantly changing tax code and must abide by a code of ethics.