It is a situation we all try to avoid: April 15th is upon you, and your tax return is not done. Yet, every year, millions of Americans find themselves in just that predicament. While procrastination is often the primary reason for not filing on time, not having the proper documentation runs a close second. When you realize your tax return will not be ready, there really is no need to panic, because your friendly Internal Revenue Service offers you Form 4868, which allows you more time to file your return. There are usually many questions surrounding the form: here are a few answers.
MY TAX RETURN WILL NOT BE READY IN TIME. DO I ALWAYS NEED TO FILE FOR AN EXTENSION?
Absolutely. Even if you think you are getting a refund, you must file for an extension. If you do not, and you file your return after the deadline, you face penalties for filing late, even if the government owes you a refund. You can file anytime before the filing deadline.
WHAT FORM SHOULD I FILE? CAN I FILE AN EXTENSION ELECTRONICALLY?
Individual filers who use the 1040 family of forms can file Form 4868 by mail, which must be completed and postmarked by the filing deadline. You can also file Form 4868 electronically, so consult your tax software program or preparer for more information. Please note that if you do file electronically, you will need to have a copy of your 2004 return available. The IRS will require specific information from your 2004 return, like your adjusted gross income, to verify your identity. Most preparers and IRS offices will have Form 4868 on paper if you prefer to file by mail. If you are filing a business or corporation return, there are different forms you must fill out, including Forms 7004 and 1138. Please consult with a tax professional for more information.
WHAT SHOULD I DO IF I AM OUT OF THE COUNTRY?
If you live or work outside of the country, you can also use Form 4868 to get an extension, even if you happen to be back in the country on April 15th. The IRS considers the fact that you may not have had enough time to properly prepare your return in time, so do not worry if you happen to be back in the country before or on April 15th. The extension will only be for two additional months, but you can request an additional four months on the form.
GETTING AN EXTENSION MEANS I HAVE MORE TIME TO PAY MY TAXES, RIGHT?
No! The only thing Form 4868 provides is more time, up to six months, to file your return. IT DOES NOT PROVIDE MORE TIME TO PAY YOUR TAXES, which is a common misperception by taxpayers. That is why it is important to know that if you believe you will owe taxes, you should pay as much as you can with Form 4868. You will begin to accrue interest and penalties on any taxes not paid by the filing deadline. Even if this means overpaying your taxes initially when you file an extension, it is far better to get a refund later than to pay unnecessary penalties and interest.
WHAT DO I NEED TO DO TO COMPLETE FORM 4868?
Filling out the form is simple. It requires only your personal information, including your social security number, and your estimate of tax liability for 2005. You will then need to list your taxes already paid to determine how much you owe, if any. If you do not have exact numbers, give your best estimate. If you do owe, and cannot pay the full amount, you can send a partial amount and pay the rest with your return. Of course, penalties and interest will apply to the amount not paid by the deadline. If you find that you will not be able to pay off all of your taxes once your return is done, you can apply for a payment plan with the IRS. Please consult with a tax professional for more information on this option.
DO I NEED TO GIVE A REASON WHY I NEED AN EXTENSION?
No, you no longer need a stated reason.
IS MY EXTENSION AUTOMATIC WHEN I FILE?
No. While most are approved, there are situations in which the IRS may not approve it. If they do not, they will contact you.
HOW DO I KNOW IF MY EXTENSION HAS BEEN APPROVED?
If you filed by mail, the IRS will inform you by mail when your extension has been granted. If you file electronically, you will get an electronic confirmation.
SHOULD I GET PROOF THAT I FILED FOR AN EXTENSION ON TIME?
If you mail in Form 4868, merely stamping it and having it postmarked before the deadline is usually enough. However, if you are currently on a payment plan with IRS for back taxes, or if you have had incidents with the IRS before, such as not filing, audits, lost returns, etc., you should mail an extension certified to have proof of mailing. While losing an extension request is rare, if it does happen, it could cause plenty of headaches. If you are currently repaying back taxes in a payment plan, not filing a return or extension on time could nullify that payment plan and cause all back taxes to be due immediately. If you have had any other unpleasant history with IRS, your account could be red flagged if you do not file or extend on time. That could mean a call or visit from IRS, so you will want to avoid all of that by having some proof of mailing. If you file electronically, proof of filing should not be a problem.
Whether you are filing your return or filing for an extension, your best advice would be to FILE EARLY. It is the easiest way to avoid the pitfalls and the mad rush that come with filing at a deadline.
(Please note: this article only gives general information regarding extensions for filing tax returns. Filing deadlines may vary, and special circumstances may apply to some taxpayers. For specific questions and instructions, please consult a tax professional or contact the IRS directly at 1(800) 829-1040.)