How Much Does It Cost to File a Tax Extension?

Filing a tax extension can be a helpful option for taxpayers needing more time to organize financial documents. However, while the extension delays the deadline to file, it does not postpone the requirement to pay taxes owed.

Fees for Federal Extension

The IRS does not charge a fee for submitting Form 4868, which gives taxpayers an additional six months to file their returns, extending the deadline from April 15 to October 15. However, the extension does not delay the payment of taxes owed. Interest accrues on unpaid taxes from the original due date, calculated quarterly at the federal short-term rate plus 3%. Additionally, a late payment penalty of 0.5% per month, up to a maximum of 25%, may apply. Taxpayers should be aware that these charges can add up quickly if payments are delayed.

Possible Third-Party Filing Charges

While filing a federal tax extension through the IRS is free, using third-party services often incurs costs. Tax preparation software like TurboTax or H&R Block may charge fees ranging from $20 to $100, depending on the package and features selected. Advanced packages, which may include extras like audit protection, come at higher prices. Taxpayers should weigh the value of these features against the associated costs.

Professional tax preparers, including certified public accountants (CPAs) or enrolled agents, provide personalized assistance but at a higher cost. Fees can range from $150 to several hundred dollars, depending on the complexity of the tax situation and the preparer’s expertise. For individuals with complicated tax scenarios, such as multiple income streams or business ownership, hiring a professional can be a worthwhile investment.

Potential Penalties and Interest

The IRS charges interest on unpaid taxes from the original due date, compounded daily. As of 2024, the rate is the federal short-term rate plus 3%, adjusted quarterly. A late payment penalty of 0.5% per month, up to 25%, also applies to unpaid taxes. If payment remains overdue 10 days after the IRS issues a notice of intent to levy, the penalty rate may increase to 1% per month.

Taxpayers facing genuine hardships, such as illness or natural disasters, may qualify for penalty abatement. Additionally, the IRS offers installment agreements, allowing taxpayers to spread payments over time to reduce the financial strain of penalties and interest.

State Extension Cost Variations

State tax extension policies vary widely. Some states, like California, automatically grant an extension without requiring a form if 90% of the tax liability is paid by the original due date. Others, such as New York, require formal requests like Form IT-370 and may impose fees or interest on unpaid taxes. States like Pennsylvania charge a flat fee for extensions, while others levy penalties similar to federal rules if taxes are not paid on time. Extension deadlines also differ, with some states aligning with the federal October 15 deadline and others setting unique dates. Taxpayers should carefully review state-specific requirements to avoid non-compliance.

Professional Service Expenses

Hiring a professional tax preparer can simplify the extension filing process, but costs vary based on the type of professional and the complexity of the tax situation. Tax attorneys, with their legal expertise, typically charge $200 to $500 per hour and are often sought for complex legal issues or disputes. CPAs, who combine accounting and tax knowledge, charge between $150 and $400 per hour, making them a popular choice for individuals with intricate financial affairs. Enrolled agents, federally authorized to represent taxpayers before the IRS, are generally more affordable, with rates ranging from $100 to $250 per hour.

Despite the expense, many taxpayers find professional services worthwhile, especially for complex tax scenarios or to avoid potential penalties and interest. Accurate and thorough tax preparation often justifies the cost, providing peace of mind and reducing the risk of errors or non-compliance.