Federal tax deadlines extended for 25 states, but not payments, in 2023.

• The deadline for filing 2023 federal taxes is Tuesday, October 15 if you filed an extension.
• In 25 states and two U.S. territories, taxpayers are granted an automatic extension to submit their returns.
• Filing tax returns can be extended, but paying taxes due cannot, and penalties can accumulate.

In April, approximately 19 million U.S. taxpayers applied for an extension to submit their 2023 federal income tax returns, which granted them an additional six months to file.

The October 15 deadline for many taxpayers is quickly approaching.

In federally-declared disaster areas, which currently encompass all or parts of 25 states and several U.S. territories, taxpayers will be given additional time.

Taxpayers who meet certain criteria will receive an automatic extension to file their 2023 federal returns, with deadlines ranging from November 1 to May 1, 2025. To determine eligibility, check the IRS database. For state returns, contact your state's tax authority for next steps.

Taxpayers who experienced natural disasters after the April 15 federal tax deadline will have more time to file their tax returns, but not to pay, according to the IRS.

Penalties can add up

If taxpayers request an extension but fail to submit their return by October 15, they face a penalty of 5% of unpaid taxes per month or partial month, with a maximum of 25%.

If you didn't pay enough tax by April 15, you will be charged a penalty of 0.5% of your unpaid balance per month or partial month, up to 25%, in addition to an interest-based penalty.

You won't be penalized if you're owed a refund.

Experts suggest that taxpayers can evade or minimize penalties by submitting for an extension, forecasting their liability, and making partial payments towards that amount prior to April 15 and in subsequent months.

Miklos Ringbauer, founder of MiklosCPA, stated that there is no failure-to-file penalty or underpayment penalty is significantly reduced if an extension is granted or extra payments are made throughout the year.

If you can't pay, consider an installment plan

If you can't pay your debt to the IRS immediately, the agency suggests applying for a payment plan.

If you owe $100,000 or less in tax, penalties, and interest, you have up to 180 days to pay with a short-term payment plan. If you owe less than $50,000, you can pay monthly with a long-term payment plan.

The IRS requires you to pay taxes as you go, but you'll still accrue interest on unpaid taxes if you choose an installment plan. However, the failure-to-file penalty is reduced by half when you have an installment agreement with the IRS.

Start planning ahead

Planning ahead for what you owe in 2023 is a good idea, but there isn't much you can do to change the outcome at this point.

If Congress fails to act, higher tax rates may become effective in 2026 due to the expiration of provisions in the 2017 Tax Cuts and Jobs Act.

"Jim Buffington, a CPA and advisory services leader for Intuit Accountants, suggested that it may be beneficial to discuss capital gains acceleration and income shifting strategies. He advised that this should be done before the end of 2024 to make necessary arrangements."

To avoid a surprise bill next April and reduce the penalty for underpayment, consider adjusting your withholding or making estimated tax payments for this year, advised IRS spokesperson Eric Smith.

If you increase the tax withheld from your pay now, the IRS assumes that you made equal payments throughout the year, which benefits you when it comes to any estimated penalty that would apply.