9 Facts About Extensions
Updated: Apr 19, 2019
“Taxes: Of life’s two certainties, the only one for which you can get an automatic extension" - Anonymous
As the April 15 filing deadline quickly approaches, many taxpayers will consider filing an extension. While it’s always best to go ahead and file your tax returns instead of procrastinating, you may find yourself in need of extra time because of missing documents, being away from home, or simply dealing with obstacles life has put in your way. If an extension might be an option for you, here are nine things you should know:
1) Unlike regular tax returns, filing an extension is simple. Form 4868 – the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return – can be e-filed or mailed. As the name implies, acceptance is automatic, but you do want to keep proof of mailing or e-filing the form.
2) The extension form only grants additional time to prepare and file the tax return; it does not give more time to pay any tax due. Taxpayers who anticipate owing a balance on their return should estimate how much they owe and make a payment prior to April 15.
3) Taxpayers who file an extension will have until October 15 to file their 1040. Because there is no “extension of extensions,” it’s important to go on and file as soon as possible instead of waiting until the October deadline.
4) US citizens living and working abroad get an automatic two-month extension; no form 4868 is required. However, though the deadline for expats to file their returns is extended to June 15, any amount owed is still due by April 15. Some military members also get special consideration in terms of filing their taxes.
5) The deadline for filing an extension is April 15. Once that date has passed, so has the opportunity to request additional time to file. Taxpayers who fail to timely file either a tax return or an extension are subject to Failure to File penalties.
6) The Failure to File penalty is 5% of the amount owed per month (or part of a month) until paid, up to a total of 25% of the amount owed. For example, a taxpayer who owes $1000 does not file an extension. They file on May 25, which is two months late. They will be subject to a $100 late penalty, because 2 months penalty is 10%, multiplied by the outstanding balance of $1000 = $100. Waiting until August to file raises the penalty to $250. That’s a lot of money to lose because of missing the deadline to file a simple extension.
7) Taxpayers who are not able to pay their balance due should still file an extension. They will be subject to a Failure to Pay penalty. However, this penalty is small compared to the Failure to File penalty discussed above, since it’s only .5% of the amount owed per month. Similar to our previous example, a taxpayer owes $1000 but this time files an extension. When they get around to filing their return on May 25, their Failure to Pay penalty will only be $10, since $1000 x .10 (two months at .5) = $10.
8) Keep in mind that all taxpayers are subject to interest on unpaid tax bills regardless of whether they filed a return, an extension, or neglected to file anything. Filing does not stop the clock on interest owed, but the IRS normally charges a modest interest rate.
9) For tips on ways to handle a tax bill that you’re unable to pay right away, see our previous blog Help! I Owe the IRS! The IRS has several programs in place to assist taxpayers who owe but are unable to pay their full balance before the deadline.
If you decide you need to file an extension, we can assist you and make sure any necessary state extension forms are filed too. It’s time to face one of life’s unpleasant uncertainties and get your tax return filed. Then you can commiserate with Will Rogers, who said ”The only difference between death and taxes is that death doesn't get worse every time Congress meets.”