So you’ve heard something about IRS Form 4868 (more commonly known as a tax extension), but you don’t know anything about it. The good news is that, compared to other tax forms, this one is pretty straight forward. The bad news is that it is still a tax form, so there are still ways to get confused. Hopefully this post will answer all of your questions.

Official Name for Form 4868
Application for Automatic Extension of Time To File U.S. Individual Income Tax Return

What’s the purpose of the form?
Form 4868 is used to apply for 6 more months (4 if  “out of the country” and a U.S. citizen or resident) to file Form 1040, 1040A, 1040EZ, 1040NR, or 1040NR-EZ.

How do I qualify for a tax extension?
This is way easier than you can even imagine. To get an extension, all you have to do is:

1. Properly estimate your 2008 tax liability using the information available to you,

2.  Enter your total tax liability on line 4 of Form 4868, and

3.  File Form 4868 by the regular due date of your return.

According to the IRS, although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes. If you do not pay the amount due by the regular due date, you will owe interest. You may also be charged penalties.

Here’s the best part: you do not have to explain why you are asking for the extension. The IRS will only contact you only if your request is denied.

Do not file Form 4868 if you want the IRS to figure your tax or you are under a court order to file your return by the regular due date.

When do I file a tax extension?
File Form 4868 by April 15. Those of you that are fiscal year taxpayers (and this is pretty rare) must file Form 4868 by the regular due date of the return.

What if I am out of the country on April 15?
If you are out of the country and a U.S. citizen or resident, you are allowed 2 extra months to file your return and pay any amount due without requesting an extension. For a calendar year return, this is June 15. File Form 4868 and be sure to check the box on line 8 if you need an additional 4 months to file your return.

If you are out of the country and a U.S. citizen or resident, you may qualify for special tax treatment if you meet the foreign residence or presence tests. If you do not expect to meet either of those tests by the due date of your return, request an extension to a date after you expect to qualify using Form 2350, Application for Extension of Time To File U.S. Income Tax Return.

You are out of the country if:

• You live outside the United States and Puerto Rico and your main place of work is outside the United States and Puerto Rico, or
• You are in military or naval service outside the United States and Puerto Rico.

If you qualify as being out of the country, you will still be eligible for the extension even if you are physically present in the United States or Puerto Rico on the regular due date of the return.

For more information on extensions for taxpayers out of the country, see Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

3 ways to request an automatic extension of time to file a U.S. individual income tax return.
1. You can file Form 4868 electronically by accessing IRS e-file using your home computer or by using a tax professional who uses e-file.

2. You can pay all or part of your estimate of income tax due using a credit card.

3. You can file a paper Form 4868.

What is e-file?
IRS e-file is the IRS’s electronic filing program. You can get an automatic extension of time to file your tax return by filing Form 4868 electronically. You will receive an electronic acknowledgment once you complete the transaction. Keep it with your records.

It’s only November, but already reasons to file a tax extension next year are rearing their head.

On November 6, a new law that went into effect that extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers.

According to the IRS, The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase.

The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase.

But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.

For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.

The IRS says that a new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return.

A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405.

So this is all good news. You have more time to go out and take advantage of that tax credit. Second, don’t worry about filing your taxes in April while you get situated in your dream home. You can always file a tax extension and get an extra 6 months to file!

A quick thank you for being listed on the 100 Money Experts You Should Follow and Learn From on Twitter list. Out of the 100 Twitter accounts listed, we are just one of 10 recommended for taxes.

We appreciate the support. And, yes, when it comes to filing a tax extension we do consider FileLater to be pretty special if we do say so ourselves. After all, we are the only place where you can file both a business tax extension and a personal tax extension.

In a recent press release the IRS stressed a couple of points they want taxpayers to heed:

“The IRS encourages taxpayers to choose direct deposit when they file their returns because it puts an end to lost, stolen or undeliverable checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct deposit is available for filers of both paper and electronic returns.

The IRS also encourages taxpayers to file their tax returns electronically because e-file eliminates the risk of lost paper returns. E-file also reduces errors on tax returns and speeds up refunds.”

In the same statement, the IRS went on to add, “E-file coupled with direct deposit is your best option; it’s easy, fast and safe.”

I’m in complete agreement. e-Filing is a no-brainer for so many reasons. And as I mentioned in my last post, more and more people are e-Filing these days.

Remember, e-Filing isn’t just for your 1040. You can e-File a tax extension as well.

The IRS reported come interested numbers today about the recently completed 2008 tax season:

A record 95 million individuals e-filed their federal income tax returns during 2009, up almost 6 percent from last year’s total of nearly 90 million. About two out of three taxpayers e-filed this year; out of the 141 million returns filed so far this year, over 67 percent were e-filed, compared to 59 percent last year.

The IRS added that more taxpayers choose to e-file their tax returns each year. While the total number of tax returns has increased 10 percent during the past decade, the number filed electronically has increased by 168 percent. Taxpayers who e-file from a home computer continue to be an increasingly significant segment of those who e-file.

With the October 15 deadline fast approaching, our support team has been busy answering one common question:

I don’t have time to finish my taxes by October 15, can I get an extension on my extension?

The answer is NO.

Unfortunately, the days of the second extension are over. The IRS only allows one 6-month extension to file form 1040.

Your only choice is to file your taxes. If your 1040 and money you owe the IRS is not filed on time, it may be subject to penalties and late fees.

If your problem is that you can’t possibly pay what you owe, I suggest you read the IRS’ recommendation on how to setup an Installment Agreement (otherwise known as a payment plan).

Between April 15 , the IRS income tax deadline, and October 15, the extended IRS income tax deadline, we often have customers ask if there is an advantage to filing income taxes now, or waiting until close to October 15. Here are few considerations to make as you decide if it’s time to get your 2008 taxes submitted:

If you expect to get a refund, the sooner you file the sooner you get your money. For those who expect to owe and have not made an estimated payment when their income tax extension was filed, the IRS is slowly but surely accumulating interest on what you owe them. However, if you did make a payment with your extension, there’s nothing to worry about.

If you extended because you had trouble finding a CPA, or your CPA was charging a last minute premium near April 15, realize that there’s another busy period for CPAs as we near the extended tax deadline (although nothing compared to the April 15 rush). You can do yourself, and your CPA, a favor by not waiting until the last minute.

The IRS generally doesn’t allow additional extensions beyond the October 15 extended deadline. So, you’ll want to make sure you are on track to get your taxes submitted by the extended deadline, or you could be faced with stiff penalties by the IRS.