In the US, individual taxpayers have the option to file for an extension of time to file their tax returns. Usually, you can receive a six months extension from the original due date, but keep in mind that the filing extension does not extend the payment due date which is the date the original tax return was due.
Why is the extension important if the payment is still due? The quick answer is certain forms which get attached to the tax return have significant late filing penalties, and the tax return itself can be subject to a 5% per month late filing penalty (based on the balance due), whereas the late payment penalty is only 0.5% per month. Interest would also be calculated on the previously mentioned penalties and the balance due.
If a tax preparer mentions wanting to file an extension, you should ask them why they want an extension, as there are many reasons why a taxpayer or a tax preparer may want to file an extension. For example, a taxpayer may not have all the information required to file an accurate return by the filing due date, or they may have personal matters arise that do not allow them to timely file a return. Tax-preparers often extend tax returns at the request of the taxpayer (for reasons previously listed), or in some cases, it is just a matter of workload management and resource allocation.
For 2019 tax filings, due to COVID-19, the Internal Revenue Service has extended the filing and payment due dates to July 15th for all individual taxpayers. The due date information below relates to a typical taxation year:
The typical filing due date for US individual income tax returns is generally April 15th of the following year (may be adjusted if April 15th falls on a weekend or holiday).
For a US citizen or resident whose tax home and abode is outside of the US, the taxpayer would receive an automatic extension to file to June 15th of the following year. No formal form is required to be filed for this extension, but rather a note is made on the tax return that is filed referencing the Regulation allowing for the automatic extension.
For both April 15th and June 15th filers, taxpayers can file a Form 4868 “Application for Automatic Extension of Time to File US Individual Income Tax Return” by the original due date of the return to receive an extension to file to October 15th. It is important to remember that payment due dates cannot be extended, only the filing due dates can be extended. It is also important to check the filing due dates of forms which are filed separately from the tax return as they can often have a different due date than the tax return itself.
There is an additional extension that can be requested to December 15th, but the extension is not automatic and has to be approved by the IRS and thus should only be utilized in very specific situations.
If you have a state filing requirement, it is important to check the original filing due date as it can differ from the US Federal filing due date, and the ability and method of obtaining a state filing extension can differ as well.
If you’d like to file for an extension, learn more about US Tax or simply discuss your concerns pertaining to taxes, feel free to contact us.