Tax Extension Glossary

Let's face it, when it comes to taxes it feels like there's a whole new language to learn. In an effort to make tax extensions a little easier to understand, we've put together the follwing list of terms and definitions.

April 15 - We all probably know this one. April 15 is Tax Day. It is the day that your income taxes must be filed and paid to the Internal Revenue Service (IRS). Although there is no way to extend the deadline to pay the taxes you owe, you can extend the amount of time you have to file your tax paperwork if you file a tax extension.

Calendar Year - The one-year period beginning January 1 and ending on December 31. For tax extension purposes, corporations that follow the calendar year have until March 15 to file their taxes.

e-File - In an effort to reduce the amount of paper used to submit tax forms, the IRS created the e-File system so that forms like Form 4868 and Form 7004 can be submitted to the goverment electronically.

Electronic Federal Tax Payment System (EFTPS) is one way to make tax payments if you don't want to write a check or pay by credit card. It's offered by the U.S. Department of the Treasury that allows taxpayers to make tax payments either online or via telephone.

Electronic Funds Withdrawal (EFW) is a way to electronically pay the IRS the taxes you owe (meaning, you don't have to write and mail a check). The way it works is you provide your bank information (account number and routing number), an amount, and a withdrawal date when you use an authorized e-File provider. The IRS will then deduct that amount from your account on the date scheduled.

Fiscal Year - Not every corporation follows the calendar year (January 1 - December 31). Those that do not are considered Fiscal Year filers. For corporate tax fiscal year filers, the returns are due 2 ½ months after the end of the fiscal year.

Form 1040 is the standard IRS form that individual taxpayers use to file their annual income tax returns.The due date for the 1040 is April 15.

Form 1040A is a simplified version of the 1040 for individual income tax. To be eligible to use From 1040A, a person must fulfill certain requirements such as not itemizing deductions, not owning a business and having a taxable income of less than $100,000.

Form 1040-EZ is an alternative to the IRS Form 1040 that offers a faster and easier way to file taxes, meant for taxpayers with tax situations that are viewed as less comlicated. In order to be eligible to use this form, a person must have a taxable income of less than $100,000, interest income of $1,500 or less, possess no dependents, and fulfill other requirements set by the IRS.

Form 1040NR and Form 1040NR-EZ - Form 1040NR is also known as U.S. Nonresident Alien Income Tax Return. Out of the two forms, it is also known as the long version. Form 1040NR-EZ is the tax return form most frequently used by nonresident aliens in United States. If you were a nonresident alien during the previous year, who had any U.S. source of income, you must file your tax return on one of these two forms.If you qualify for either form and want to file a tax extension, simply check Box 9 on the form.

Form 4868 is the name of the form that a taxpayer in the United States should fill out and submit to the IRS if they want to receive an automatic extra 6 months to file their taxes. A tax extension does not extend the amount of time a taxpayer has to pay taxes they owe. If you owe, you still must make your payments by April 15 or face potential tax penaties and fees.  

Form 7004 is the required form necessary if a businesses wants to receive an extension of time to file their taxes. Like Form 4868, this form does not grant extra time to pay any taxes owed at the deadline (which for businesses is March 15). Businesses required to use Form 7004 to extend their tax deadline include C-Corporations, S-Corporations, multi-member LLCs, partnerships, trusts, and estates. To save time and paperwork, e-File Form 7004 directly to the IRS.

Individual Taxpayer Identification Numbers (ITINs) - If you are a nonresident or resident alien and you do not have and are not eligible to get an Social Security Number, you must apply for an ITIN. Although an ITIN is not required to file Form 4868, you will need one to file your income tax return. For details on how to apply for an ITIN, see Form W-7 and its instructions. Allow 8–10 weeks for the IRS to notify you of your ITIN. If you already have an ITIN, enter it wherever your SSN is requested. If you are applying for an ITIN on Form W-7, enter “ITIN TO BE REQUESTED” wherever your SSN is requested.

Late Filing Penalty is usually charged if your return is filed after the due date (including extensions). The penalty is usually 5% of the amount due for each month or part of a month your return is late. The maximum penalty is 25%. If your return is more than 60 days late, the minimum penalty is $135 or the balance of the tax due on your return, whichever is smaller.

Late Payment Penalty is usually 1⁄2 of 1% of any tax (other than estimated tax) not paid by the regular due date. It is charged for each month or part of a month the tax is unpaid. The maximum penalty is 25%.

October 15 is the new deadline to file your taxes if you have successfuly filed a tax extension.

Out of Country - If, on the regular due date of your tax return 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. If you need an additional 4 months to file your return (extending your due date to October 15) file Form 4868 and check the box on line 8.

March 15 is the deadline for coporations to file their taxes.

Social Security Number is an identification number given to all Americans. Besides your name and address, it is one of only a few pieces of information required to file a tax extension.

Substantial Presence Test - According to the IRS, you are considered a U.S. resident if you meet the substantial presence test for 2008. You meet this test if you were physically present in the United States for at least:
      1. 31 days during 2008, and
      2. 183 days during the period 2008, 2007, and 2006, counting all the days of physical presence in 2008, but only 1/3 the number of days of presence in 2007 and only 1/6 the number of days in 2006.

Tax liability is the total amount of tax that a person or a business is legally obligated to pay to the IRS at the end of a certai time period (like the end of the calendar year, for example).