Tax Extensions
Table of Contents
What does it mean when you file a tax extension?
The IRS allows individuals, businesses and estates to file tax returns after the deadline without any late-filing penalties by obtaining an extension.
Rather than having to file your 2020 federal tax return by the May 17 deadline, you can file until October 15, 2021.
Due to the impact of the Coronavirus, the federal tax return deadline for 2020 tax returns has been extended from April 15 to May 17, 2021.
Common reasons for requesting an extension on filing tax returns include:
- You need more time to find missing tax documents
- You just haven’t had enough time
- An unexpected life event has occurred
Can I get an extension to pay my taxes?
However, it is important to note that a tax extension does not extend the deadline to pay any taxes due. If you fail to pay your taxes by the original deadline, you can face penalties and interest.
To avoid this, you can calculate a quick estimate and submit a payment. Even if you overpay, you can claim a refund in a few months’ time when you file your extended state tax return.
Personal tax return extension:
Complete and file Form 4868 by the May 17, 2021 deadline.
Estate tax return extension:
Complete and file Form 4768 to obtain an extension to file the estate tax return on Form 706.
Typically, the estate tax return is due within nine months of the decedent’s death. An executor who is outside of the US can file for an extension of twelve months, so long as the application for extension is filed with the IRS before the termination of the first extension.
Business tax return extension:
Corporations filing an income tax return on Form 1120 can obtain an extension provided Form 7004 has been filed with the IRS by the original deadline.
Partnerships can obtain an automatic five-month extension for filing an income tax return on Form 1065.
If you are a sole proprietor preparing a Schedule C to report taxable business earnings, you can obtain a filing extension by using Form 4868.
What if I’m way behind on my U.S. tax returns?
There is a special IRS program to help you catch up on your U.S. taxes safely, without fines and penalties
STREAMLINED AMNESTY
It’s for American citizens that didn’t know they had to file U.S. tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties. If you have children, we can backdate your Child Tax Credit Refund for 3 years.
Get a quote here.
Expatriate tax return extension:
US taxpayers who are outside of the US on the tax filing deadline date can obtain a two-month extension to file. This extension allows you to avoid penalties for late filing. However, you will still face interest charges on any taxes you have not paid by the original deadline.
To be eligible for this extension, your main place of business must normally be outside of the US, or you must be on active duty in the US military overseas.
To obtain this extension, file your return no more than two months after the original deadline. Ensure you attach a statement that explains why you qualify for this extension.
Tax return extension for military personnel:
The IRS offers automatic extensions for some federal income tax deadlines to US military personnel who are serving in a combat zone or hazardous duty area while deployed overseas. Such personnel can delay filing and paying their taxes for 180 days following the end of their active duty in the zone. If your spouse is serving in a combat zone or hazardous duty area, you are able to sign the return on their behalf to receive the extension. You will need to attach either a power of attorney, or a signed statement about your spouse’s active service in this area.
Military personnel assigned to active duty outside of the US or Puerto Rico, on assignment for the entire 24-hour period of the tax filing deadline, receive an automatic two-month filing extension. This is just an extension on filing, not for paying taxes.
Does filing a tax extension increase audit risk?
Obtaining a tax extension can actually reduce audit risk as it ensures you have enough time to submit the correct information and documentation.
The top things to look out for that trigger IRS Audit include:
- Unreported income
- Earning more than $200,00 annually
- Not reporting foreign accounts
How do I know if my tax extension was accepted?
Call the IRS (800-829-1040) to enquire about whether your request for a tax extension was approved.
Can a tax extension be denied?
Yes, your request for a tax extension can be rejected. You will receive a notification of the rejection by email or by letter from the IRS. However, you can correct your application and resubmit it with the IRS for no additional cost.
To avoid your request for a tax extension being rejected, ensure there are no misspellings, mixed numbers, or any other errors that do not match with IRS records in the extension form.
How do I file for a state tax extension?
In response to the COVID-19 pandemic, the IRS an most state departments have extended the 2021 tax filing deadline for the tax year 2020. Although most states have matched the extended deadline with the federal deadline (May 17), other states have different deadlines. On top of this, you are able to request an additional extension for filing your state taxes.
Every state has its own requirements for obtaining a tax filing extension. States such as California, Wisconsin and Alabama offer automatic extensions for taxpayers, while other states require a specific form to be filed by the original deadline.
Ensure you file the correct state-specific form and that you have paid any taxes you owe by the original deadline. It is best if you calculate a quick estimate and submit a payment, even if you overpay, you can claim a refund in a few months’ time when you file your extended state tax return. Otherwise, you may be subject to late-payment penalties.
How do I know if my request for a state tax extension has been approved?
You will need to contact the state tax authorities in your state to check on the status of your request.
