Extended Tax Deadline: Moves to Make Before October 15

Taxpayers who needed more time to file their 2018 federal tax returns may have received an automatic six-month extension from the IRS. That extended deadline of October 15 will soon be here.

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Keep in mind that the extended deadline gives you extra time to file your return—but not extra time to pay any tax owed. Tax payments are generally due by April 15. People who pay late are typically hit with a late-payment penalty of 0.5% per month plus interest. If you didn’t already pay the tax you expect to owe, paying it now will limit the penalty damage. Extension filers who miss the October 15 deadline will also incur a late-filing penalty, which is typically 5% per month but can run as high as 25% of the amount due.

The extended filing deadline offers a chance to make a few smart moves. The self-employed can make 2018 contributions to a SEP IRA, for example, until October 15, according to Gil Charney, director of the Tax Institute at H&R Block.

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The mid October deadline also offers a mulligan to taxpayers who contributed too much to a traditional or Roth IRA for 2018. Taxpayers can withdraw excess 2018 IRA contributions (including earnings) by October 15 to avoid a 6% penalty. If you already filed a 2018 tax return, you may need to file an amended return.

Mary Kane is a financial writer and editor who has specialized in covering fringe financial services, such as payday loans and prepaid debit cards. She has written or edited for Reuters, the Washington Post, BillMoyers.com, MSNBC, Scripps Media Center, and more. She also was an Alicia Patterson Fellow, focusing on consumer finance and financial literacy, and a national correspondent for Newhouse Newspapers in Washington, DC. She covered the subprime mortgage crisis for the pathbreaking online site The Washington Independent, and later served as its editor. She is a two-time winner of the Excellence in Financial Journalism Awards sponsored by the New York State Society of Certified Public Accountants. She also is an adjunct professor at Johns Hopkins University, where she teaches a course on journalism and publishing in the digital age. She came to Kiplinger in March 2017.