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Filing a tax extension: All the money you'll delay if you do

CNET 2/1/2022 Katie Teague
Filing for an extension gives taxpayers extra time, but there are some consequences to be aware of. Sarah Tew/CNET © Provided by CNET Filing for an extension gives taxpayers extra time, but there are some consequences to be aware of. Sarah Tew/CNET

The IRS expects the 2021 tax season to be hectic this year since they're still dealing with a backlog of tax returns. That's why you shouldn't wait too long to file your taxes. But if it's not possible to submit your taxes by the April 18 deadline, we understand -- however, you could be delaying a lot of money that's owed to you. 

When you file your tax return this year, more money could be tied to your refund than you know. Here's what you could be getting back: the rest of your child tax credit money, reimbursement for child care expenses and more stimulus check money.

Also, keep in mind that an extension doesn't postpone having to pay taxes that you owe, it just gives you extra time to file your return. We'll explain below how to file a tax extension and the money you could be delaying if you do. Here's how to track your IRS tax refund after you file. 

Am I eligible to file a tax extension? 

If you're planning to file a tax extension this year, you'll need to submit Form 4868 (PDF) to the IRS either by paper or electronically using e-file before the April 18 deadline. Note that you'll still have to pay all or part of your estimated income tax due using Direct Pay, the Electronic Federal Tax Payment System, or using a debit or credit card, and note that you're filing for an extension.

Some taxpayers are automatically granted more time to file. This includes military personnel who are serving in a combat zone or persons in federally declared disaster areas.

Will an extension postpone me from paying money to the IRS? 

No. Extending your filing deadline doesn't delay when you have to pay taxes that you may owe. According to the IRS, you need to estimate and pay at least 90% of your tax liability by the deadline to avoid late fees. Otherwise, you will have accrued interest on what you owe, which you'll eventually have to pay -- plus possible penalties -- on top of your income taxes. 

The late-payment penalty is usually 0.5% per month of the outstanding tax not paid by the filing deadline, maxing out at 25%. The IRS can also issue a late-filing penalty of 5% of the amount due for every month or partial month your tax return is late. If your return is filed more than 60 days after the due date, the minimum late-filing penalty is either $435 or 100% of the unpaid tax (whichever is less). 

For individual taxpayers, penalties and interest will stop accruing only when your balance is paid in full. For more on penalties or to work out a payment plan with the IRS, check out its web page

How are 2021 tax returns related to stimulus payments?

If the IRS owes you money for the third stimulus check due to a new qualifying dependent you gained in 2021, you can file for that payment through a recovery rebate credit when you file your taxes. You could get up to $1,400 for your dependent -- that includes a new baby born or adopted. Keep an eye out for Letter 6475 from the IRS as it will have all the details you need about last year's stimulus check when you file.

As for the first two stimulus checks, if you didn't receive either check or received less than you qualified for, you could still be eligible to claim the money through a recovery rebate credit. You'll either need to file a 2020 tax return if you haven't yet, or amend your 2020 tax return if it's already been processed. 

At the end of 2021, the IRS still had some 6 million unprocessed tax returns to go through and advises you not to file a second return if your 2020 tax return still hasn't been processed yet. 

Between the child tax credit and child care expenses, you could get a lot of money back this year. Sarah Tew/CNET © Provided by CNET Between the child tax credit and child care expenses, you could get a lot of money back this year. Sarah Tew/CNET

How are 2021 tax returns related to child tax credit money?

Six child tax credit payments went out in 2021, and the rest of the money will come with your tax refund this year after you file your taxes. If you chose to opt out of those checks last year, you'll get the full amount owed to you.

However, if you had a new baby or gained a dependent any time in 2021 that the IRS didn't know about, you could get even more money back. Or if your income changed and you didn't update those details in the IRS Update Portal, you may be eligible to receive more money.

By not filing your taxes by the deadline, you could be missing out on up to $3,600 per child -- or up to $1,800 per child if you received all the child tax credit payments last year.

Are child care expenses tied into tax refunds this year?

The child care tax credit has been expanded for 2021 tax returns. The amount of money you can get back for expenses you paid for child or dependent care has increased significantly. That means you could potentially receive up to $8,000 for one child or up to $16,000 for two or more kids.

Here's what counts as an expense: day care, babysitters, transportation to and from care providers, day camp, and before- and after-school programs. The amount of money you're eligible to get reimbursed for will be sent with your tax refund.

Will my refund be late if I file a tax extension?

Yes. The timeline for getting your income tax refund depends on when you file. And although you have until Oct. 15 to submit your return if you file an extension, it doesn't mean you have to wait that long to file.

The IRS is still experiencing delays due to the pandemic and has a backlog of unprocessed returns, so in some situations, it could take much longer than the average 21 days to issue refunds. Some refunds, especially for more complicated returns or those that need corrections, could take months to arrive.

The IRS is asking taxpayers to file electronically this year and to carefully review their details before submitting to avoid any errors that could potentially delay their refund. The agency also asks that you sign up for direct deposit to get your money faster.

How do I file my 2021 tax return? 

The IRS says that taxpayers can file and schedule their federal tax payments online, by phone or with the mobile IRS2Go app.

If you need to find a tax software service to use, and you make $72,000 or less, you can find an IRS-approved free filing service easily. You'll need to gather the following information: income statements (W2s or 1099s); any adjustments to your income; your current filing status (single, married, filing jointly); and dependent information. If you make more than $72,000, you can use the Free File Fillable Form.

If you haven't already made a tax payment, the IRS prefers that payments be made electronically, and offers a variety of ways to do so, including IRS Direct Pay, which is directly linked to a checking or savings account. Another option is by credit card using the mobile IRS2Go app, or through the Electronic Federal Tax Payment System

How can I check my IRS tax account online?

An easy way to review all your tax-related details, including your address and payment plan details, is to access your IRS account online. According to the IRS, taxpayers can use the information from their account if they need to access their adjusted gross income, find their stimulus payment and child tax credit amounts, or review their estimated tax payments or credits. Accessing your tax transcript will give you all the records necessary if you have a tax problem or a missing payment. 

If you have any additional questions you can go visit the IRS' Interactive Tax Assistant to get help. 

For more tax information, here's an explainer on the difference between a tax refund and a tax return, and here's why you might want to sign up for direct deposit when you file your taxes.

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