What If I Can’t File My Crypto Taxes in Time? How Do Extensions Work?

Devin BlackUpdated at: Mar 16th, 2020

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With a TokenTax full filing plan, we can file an extension for you for free. Create your bitcoin tax forms and have a crypto CPA file your full return.

Depending on your income and investment situation, taxes can be quite complex, and you may not be able to get all the documents and/or make all the calculations you need in time. You also don’t want to rush and make a mistake.

If you avoid filing your taxes, you will incur a 5% penalty on the taxes owed. That 5% penalty is immediate. In addition to this, you will have to pay interest. If you file for an extension, you would only have to pay interest, which is currently 0.5% per month for the first 6 months.

What’s the benefit of filing an extension?

An extension is not an extension to pay taxes due, but rather an extension of time to file. An extension can help avoid the “failure-to-file” penalty. We recommend making a payment with your extension if tax is expected to be owed. Interest on balances due will be charged with or without an extension.

The interest on your balance will be about 0.5% per month. However, it would be a 5% penalty if you do not file an extension and pay late.

Let’s look at a scenario where you owe the IRS $10,000 but cannot pay:

  • Scenario #1: Don’t file an extension. You would owe 5% immediately plus the 0.5% monthly interest. If you pay on October 15th, your tax bill would be $10,800 ($500 immediate penalty plus the 0.5% interest for 6 months).

  • Scenario #2: File an extension. Since you only owe the monthly interest, your tax bill will be $10,300.

You save $500 simply by filing an extension! We'll file your extension for free if you have a TokenTax CPA file your return.

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