Let's face it: Sometimes, you can't file your income tax returns on time. If you have any complexity to your tax returns, you are likely to need more time to gather your income tax information. Complex returns often depend on business tax returns. These business returns are most often due in March and may have been extended to September. In cases like this, you might need to apply for an extension of time to file your income tax returns. This article is about applying for federal extensions. You should consult your tax preparer regarding the rules for extensions in the states where you file income tax returns.
Taxpayers often have misconceptions about extensions of time to file. Let's dispel the most common myths we have run across.
Myth #1: Everyone who can't file on time needs an extension.
If you do not owe tax, you do not need an extension of time to file. The IRS allows you three years to file and claim your refund. The IRS doesn't usually charge a penalty for failure to file if you are due a refund; however, in most cases, you must file a return within three years of its due date to claim a refund.
Note: If you do not owe but don't file on time, you can still receive notices or payment demands from the IRS. If the IRS has reason to believe you may owe tax (even if your return will eventually explain that you won't owe), they will pursue you until you file or pay.
Myth #2: An extension extends the time for you to pay.
Your income tax for a year is due by April 15 of the following year. Period. An extension gives you more time to file but does not grant you more time to pay.
Myth #3: An extension is a "red flag" that will increase my chances of being audited.
The IRS does not reveal "red flags"; however, an extension of time to file is a legitimate mechanism in place to address the realities of reasonable efforts to file complete tax returns. More than ten million taxpayers request extensions every year. Do not be afraid of taking advantage of this valuable tool.
How to Apply for an Extension
Applying for an extension may sound complicated, but the truth is it's relatively effortless. You can get a free automatic extension to file until October 15 by following one of these steps:
- Complete Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return and mail it before the April 15 due date.
- Make an income tax payment using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card and indicate that the payment is for an extension.
You can also ask your income tax preparer to file an extension for you, but they may charge a fee.
Note: The terms of our engagement require clients to request in writing for us to file an extension on their behalf.