Do I need to file an extension if I'm expecting a tax return this year?

Wait, so if I don't file an extension and it turns out I actually DO owe money (even though I think I'll get a refund), will I get hit with penalties starting from April 15th? How much are those penalties typically?

Yes, that's exactly right. If you don't file an extension and it turns out you do owe, you'd face both a failure-to-file penalty (usually 5% of unpaid taxes for each month your return is late, up to 25%) and a failure-to-pay penalty (typically 0.5% per month on unpaid taxes). The combined penalties can add up quickly. For example, if you file 3 months late and owe $1,000, you could face penalties of around $150-175 plus interest. Filing the extension takes just a few minutes online and protects you from the more severe failure-to-file penalty, even if you end up owing.

Does it actually help with calculating whether you need to file an extension? Like can it tell me if I'm likely getting a refund based on my documents so far?

Sounds useful but I'm always skeptical about these tax tools. How accurate is it compared to going to an actual tax professional? My cousin used some online tool last year and ended up having to file an amended return because it missed some credits.

It definitely helps with preliminary calculations to see if you're likely getting a refund based on the documents you've uploaded so far. It gives you a real-time estimate that updates as you add more information, which was super helpful for me to decide whether to rush to file or take my time. As for accuracy, I was skeptical too initially. What impressed me was that it's not trying to replace a tax professional - it organizes everything and flags potential issues so you (or your tax preparer) can make better decisions. I ended up finding deductions I would have missed, and everything matched up perfectly when I finally filed. It basically takes the chaos out of tax prep without making any filing decisions for you.

How does this actually work though? Do they have some special access to the IRS or something? Seems too good to be true that they can get through when nobody else can.

Bull. There's no way this actually works. The IRS phone system is deliberately designed to be impossible. I've tried calling over 30 times this season. Either this is a scam or they're doing something shady to get priority in the phone queue.

They don't have special access to the IRS - they use automated technology to handle the waiting and phone tree navigation. Basically it's a system that waits on hold instead of you having to do it yourself, then alerts you when a human actually answers. There's nothing shady happening - they're just using technology to solve the hold time problem. The IRS still answers calls in the same order, but instead of you waiting for hours with your phone stuck on speaker, their system does it and calls you at the right moment. I was skeptical too, but it saved me hours of frustration and I actually got my question answered instead of giving up after multiple disconnects.

Not a stupid question! You file Form 4868 which you can do electronically through most tax software or the IRS Free File program. It takes like 5 minutes tops. The important thing to know: an extension gives you more time to FILE (until October 15), but NOT more time to PAY if you owe. So if you think you might owe, you should estimate and pay that amount when you file the extension to avoid penalties and interest.

Thanks for explaining! That makes sense about it being an extension to file not pay - didn't realize that distinction. I'm pretty sure I'll get a refund based on my withholding but I'll probably still file the extension just to be safe. Will check out the Free File options tonight.

But what happens if you *think* you're getting a refund but actually end up owing? Doesn't the IRS hit you with huge penalties if you file late without an extension and owe them money?

You're absolutely right to ask that! If you end up owing instead of getting a refund, and you didn't file an extension, you'd get hit with both failure-to-file and failure-to-pay penalties from the original due date. The failure-to-file penalty is much steeper (5% per month up to 25%) compared to failure-to-pay (0.5% per month). That's why I always made VERY sure I was getting a refund before skipping the extension. I had very simple taxes and always had way more withheld than necessary. For most people with more complex situations, filing the extension is definitely the safer move if you can't file on time.