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April 15, 2024

Tax Day Q&A

By Maurice D. Holloway

Tax Day is April 15, the final deadline for filing individual federal tax returns and tax payments. Greenville partner Maurice Holloway shares answers to some commonly asked questions related to filing, liability and extensions.

Q:  Does an extension to file my federal income tax return automatically grant me an extension to pay my federal income tax liability?

A: Obtaining an automatic extension to file your federal income tax return by filing Form 4868 does not grant you an extension of time to pay your federal income tax liability. A taxpayer may file for an extension of time to pay the taxpayer’s federal income tax liability by filing Form 1127. However, such extension is not automatic and the IRS will not grant the extension unless the taxpayer can show that payment of the tax on the due date will result in undue hardship to the taxpayer.

Q:  If I do not file my federal income tax return and pay my federal income tax liability timely, are there any negative consequences?

A: If you are entitled to a refund, you will not be assessed any penalties for failure to timely file and pay. However, if you owe taxes and fail to timely file your return, you will owe a failure-to-file penalty equal to 5% of the unpaid taxes for each month (or part of a month) you are late filing the return with such penalty not exceeding 25% of your unpaid taxes.

You will also owe a failure to pay penalty equal to 0.5% of the unpaid taxes per month with such penalty not exceeding 25% of your unpaid taxes. If you fail to timely file and timely pay and, therefore, are subject to both penalties, your failure-to-file penalty will be reduced by your failure-to-pay penalty so that your failure-to-file penalty will be 4.5% and your failure-to-pay penalty will be 0.5%. Even if you cannot timely pay your federal income tax liability you should still timely file your income tax return in order to avoid the failure-to-file penalty.