Extension Question

[Eugene1980]

This is my first time filing an extension due to some circumstances that happen.

I filed an extension for 2023 return. It's approved but my question is about the balance due on an estimated return??

I wanted to more research on what that was but by now I'm sure that date has passed and I figured I was going to get notified on how I would make that payment.

I want to file this weekend but well I run into any issues or can I file as normal? Never been through a situation like this filing super late. 

[Katie-P]

Hi @Eugene1980,

Thanks for your question! 

I'd like to explain a few different things.

1. When taxpayers file for an extension, it is not an extension of time to pay; it is just an extension of time to file. If you used TurboTax to file your extension, the program would have asked you if you wanted to make a payment. You would then have had to estimate how much taxes you were likely to have owed, and you'd have been given the option to pay using TurboTax.
2. It's possible that you are talking about estimated taxes though, not the amount due on an income tax return. Estimated taxes are paid by some taxpayers each quarter. They do this so that they will avoid underpayment penalties levied by the IRS. Most often, self-employed taxpayers are the ones who pay quarterly estimated tax payments. They do this because they don't have federal tax withholdings from regular paychecks. If you saw messaging in TurboTax about quarterly estimated taxes, it may mean that TurboTax considered your 2022 or 2023 taxes and assumed you will owe taxes when you file your 2024 tax return. Since I cannot see what you have entered in your 2023 return, it's hard for me to say. But you're not going to run into any issues with this when you file your 2023 return. You'll just owe what you owe.
3. There is a section in the TurboTax interview about estimated taxes. Here's an article about that: Can TurboTax calculate next year's federal estimated taxes? 

I hope this info is helpful. I'll keep eyes on your post today in case you have any follow-up questions. Thanks again!

[Cindy4]

You can file as normal, but if you expect to have a balance due you will want to pay that as soon as possible to curtail any penalties and interest.  You can pay here Pay Estimated Taxes .  Indicate that the payment is for form 1040 for tax year 2023.

The extension is an extension of time to file, not time to pay.  This is confusing, but basically the IRS considers the tax system a "pay as you go" system.  If you end up owing more than $1,000, they will assess penalties and interest from April 15th forward.

May not be good news, but hope it helps!

Cindy

[KarenL4]

Hi, Eugene1980,

Don't worry too much about how the estimated balance due on your extension was calculated.  It was just an estimate and you can move forward with the final return and pay your taxes according to the final tax return balance due or refund. Where the balance due on the estimate will be important is whether or not you paid your actual taxes due on or before the due date. An extension to file is not an extension to pay, and your taxes do need to be paid timely to avoid the "failure to pay penalty."

The failure to pay tax penalty is 0.5% of the tax you owe per month or part of a month, but it also caps at 25% of the tax due. If you set up an IRS installment agreement, the IRS will reduce your failure to pay penalty to 0.25% of the tax you owe while the installment agreement is in effect.  This article goes more in-depth. Great job getting that first extension filed! 

Hope this helps!

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Regards,

Karen

[marctu]

I am sorry to hear that life has taken over.  First, I would encourage you to complete the tax filing as quickly as possible, as you wrote that you will try to file soon, and then make the payment through Turbo Tax in Step 2 of Checkout.  You should have no issues in doing so.   

One area that you need to pay attention to is that you should check that no extension payment shows on the tax return, as you did not make any payment. 

When in Turbo Tax Choose:

1. Deductions and Credits

2.  Then scroll way down to Estimates and Other Taxes Paid

3. Other Income Taxes - Click the Start or Update button

4.  Next page second section Payments with Extension

5.  Open the Federal and make sure there is no payment there and if so, then remove it. 

The standard tax extension, which you filed, allows you to file your tax return after the usual deadline.  However, it doesn't buy you more time to pay any taxes you may owe.  

Penalties and interest are based on how much you owe and for how long.

• Late payment penalties are calculated at 0.5% of the unpaid tax balance per month.
• The maximum you can be charged in late payment penalties is 25% of the unpaid tax.

Interest on unpaid tax compounds daily from the original due date of the return until the date you pay in full. This results in a daily recalculation of the principal amount plus accrued interest.

Good job on filing the extension though.  Without an extension, the Late Filing Penalty would have applied.   Late filing penalties can add 25% to your tax bill.  

Thank you for the opportunity to answer your questions @Eugene1980

All the best,

Marc T.

TurboTax Live Tax Expert