Resource Category: Personal Tax Extension Resources

Do Tax Extensions Make the IRS Angry?

While deciding whether or not to file for an income tax extension, many taxpayers wonder if the IRS frowns on this sort of thing.

In fact, many tax professionals contend that filing an income tax extension actually makes you less likely to be audited by the IRS. This is believed because most IRS agents are busy filling their audit quotas in March, April, and May ― although the IRS won’t tell anyone their secret.

It is only natural to wonder. In most situations, you are penalized for lateness and past-due accounts via late fees and interest charges. Submitting a proper tax extension, however, means that you’ll have 6 extra months to file your personal tax return ― and you don’t have to worry about IRS filing penalties. But keep in mind, a tax extension only extends your deadline to file, and you must still pay any taxes owed for that year by the original due date of your return (April 15 for individuals and March 15 for businesses).

The IRS Doesn’t Care If You Request an Income Tax Extension

The IRS does not ask for a reason when you file for a tax extension. They will automatically grant a 5- or 6-month extension to anyone who fills out the application properly and submits it by the deadline.

Some people think that tax extensions are only for procrastinators who can’t pull themselves together in time ― but you’d be surprised by how many individuals and businesses routinely file for tax extensions each year. Besides, you never know when something might pop up that demands your time.

There are many reasons to request a tax extension, including the following:

  • If someone else failed to provide the proper paperwork (such as a W-2 or 1099 tax form) that you need in order to file on time
  • If you experienced certain life changes (such as marriage, divorce, or having a child) and you are now faced with a new set of tax requirements, tax credits, tax deductions, and tax forms to deal with
  • If your accountant (CPA) becomes overwhelmed with other clients ― who are before you in line
  • If you couldn’t find a good accountant or tax preparer at all
  • If you tried using tax software, but it didn’t work out for you
  • If you’re just a procrastinator

No matter what your particular motive is, remember that the IRS doesn’t care (and doesn’t ask) why you’re filing for a tax extension. As long as you fill-out the form correctly (Tax Form 4868 for individuals and Tax Form 7004 for businesses) the IRS will automatically grant your request.

File Your Tax Extension Online Now!

Now that you’ve decided to file for a tax extension, you can request it online in just minutes right here at FileLater.com. The FileLater system will automatically check your application for mistakes to help ensure a smooth submission. You will also be notified via confirmation email as soon as the IRS approves your tax extension request.

Our dedicated Support Team is standing by to help you. If your tax extension request is denied for any reason, FileLater will tell you why. You will also be able to make any corrections and re-submit your extension at no additional charge.

Don’t wait another moment! It’s easy to file an income tax extension with FileLater.

E-file your personal tax extension now.

E-file your business tax extension now.

Does a Tax Extension Increase Your Chances of a Tax Audit?

In some situations, a tax extension is absolutely necessary. However, some people file for an extension every year even if they don’t actually need one. A personal tax extension will give you 6 more months to file your Federal income tax return ― although you must still pay any tax owed by the original due date (typically April 15).

You never know when an emergency (personal or financial) will pop up and force you to drop everything else. If this happens during tax season, you should file a tax extension. Are you having a difficult time finding all the receipts that you accumulated during the past year? Did you misplace your W-2 or 1099s? While you could rush to file your taxes with what you have, there is no good reason you should take that risk. Rushing through your tax return often leads to mistakes ― and those mistakes can be costly.

To request a tax extension, fill out IRS Tax Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) and submit it to the IRS by the original deadline of your tax return (usually April 15). Keep in mind that you must also send the IRS payment for any taxes due.

Tax Extensions and Tax Audits: Is There a Connection?

When someone says the words “tax extension” to you, do you automatically think “tax audit?”

Maybe it’s time to think again. No one outside the IRS knows for sure how the audit selection system really works, but many CPAs have said that tax extensions actually decrease your chances of getting audited.

Why, you ask? Many financial advisors and accountants believe that IRS officers have an “audit quota” which begins around tax filing season. Some theorize that these quotas get filled well before the tax extension deadline in October (or September for certain business tax extensions). Thus, when the surge of tax season is over and the tax returns which have been approved for extensions are finally submitted, the IRS agents have less incentive to put those returns in their audit pile.

There is some discussion as to whether or not this is true, but filing a tax extension certainly won’t single you out for unfavorable treatment by the IRS. Approximately 10 million taxpayers filed a tax extension last year, including individuals as well as businesses.

Does the IRS Hate Tax Extensions?

It’s commonly believed that the IRS frowns on tax extensions and is less likely to treat extended returns in a favorable manner. If that were the case, however, why would they offer an automatic 6-month tax extension to anyone who files for it, with no questions asked? Additionally, by filing for a tax extension you are actually demonstrating compliance with IRS regulations. Think of all the people who just file late (or not at all) without even contacting the IRS.

It is also probable that, just like you and your accountant, the IRS agents wouldn’t mind having to process fewer tax returns during March and April. Both accountants and IRS agents can be easily overwhelmed during tax season, and the chances of human error (which may trigger a tax audit) is much greater. Therefore, there is no reason you shouldn’t give everyone a bit of a break and file for a tax extension this year.

It’s now easier than ever to file a Federal income tax extension online. With FileLater, you can complete the online tax extension process in minutes, and our automated system helps reduce human error when filling out the tax forms. You will be notified via email confirmation when your tax extension is approved by the IRS ― and if, for any reason, it’s rejected, you will be told why and allowed to re-submit it for free.

If you have any questions, our dedicated Support Team is here to help. File a tax extension online with FileLater today!

VIDEO: How Filing a Tax Extension Can Save You Money

An IRS-approved tax extension provides you with extra time to file, but not extra time to pay any tax balance due. That doesn’t mean, however, that filing a tax extension won’t save you money.

There are up to 3 penalties you could face by not filing and/or paying what you owe the IRS on time (which is April 15 for most individuals). Here is a simple explanation of the different penalty charges.

IRS Late Filing Penalty

Also called the “failure-to-file penalty,” this fee is assessed if you owe tax and you don’t file your return (or tax extension) on time.

Fee: 5% of the unpaid tax for each month (or part of a month) that your return is overdue, up to 5 months. If your tax return is more than 60 days late, the minimum penalty is $135 or 100% of the tax due, whichever is less.

Example: For each $1,000 you owe the IRS, the late filing penalty is $50 per month.

Luckily, the late filing penalty can be easily avoided if you submit a tax extension by the original due date of your return.

IRS Late Payment Penalty

This penalty is assessed if you don’t pay all the amounts you owe on time, even if you file a tax return (or tax extension) by the proper deadline.

Fee: 0.5% of the unpaid tax for each month (or part of a month) that your tax goes unpaid, up to a maximum of 25%. If your tax balance is still unpaid 10 days after the IRS issues a “Notice of Intent to Levy,” this penalty increases to 1.0%. On the other hand, if you filed on time and you’ve set up an Installment Agreement with the IRS, the penalty decreases to 0.25%.

Example: For each $1,000 you owe the IRS, the initial late payment penalty is $5 per month. Depending on your situation, this penalty may increase to $10 per month, or decrease to $2.50 per month, for each $1000 that you owe.

IRS Interest Charges

Interest is charged on any unpaid tax, whether or not you’ve filed your tax return (or tax extension) on time. Interest compounds daily and the interest rate is determined every quarter (3 months).

Fee: The interest rate is the Federal short-term rate plus 3%. (For the first quarter of 2015, the interest rate is 3% for underpayments of tax.)

Example: For each $1,000 you owe the IRS, the interest charge is $30 (using the above 3% rate).

 

Here’a short video with more information about how a tax extension saves you money:

 

If you are unable to pay your tax balance on time, you can avoid the costly IRS Late Filing Penalty by filing for a tax extension with FileLater.

Does the IRS Offer Payment Plans?

One of the most commonly asked questions asked of our Support Team during tax extension season is if there are any options to pay the IRS in installments. The answer is: YES.

How an Installment Agreement Works

If you cannot pay the full amount due with your income tax return,
 you can ask the IRS if they will allow you to make monthly installment
 payments for the full amount or a partial amount of the tax owed. Also known as an IRS Payment Plan, this arrangement allows you to pay-off your tax liability over a period of time (sometimes up to five years). Note that the type of arrangement you get will depend on what kind of tax debt you have and how much you owe. If you receive a notice from the IRS, you should respond first by following the instructions included with the notice. Usually the IRS will ask you to contact them by phone or mail. After that, you will receive further instructions and have the chance to request an installment agreement.

To ask for an installment agreement, use Tax Form 9465,
 known as the Installment Agreement Request. You should receive a response from the IRS within 30 days. You can also apply for an installment agreement online.
 To do that, go to the IRS website and click on the “Payments” tab at the top. You will see a section titled “Can’t Pay Now?”

There are fees associated with setting up an installment agreement, ranging from $43 to $120 depending on your request and situation. Keep in mind
 that you will also be charged interest and possibly a late payment penalty on
 the tax not paid by the date your return is due, even if your request to set up an installment agreement is granted. To limit the interest and penalty charges, you
 will want to file your tax return (or tax extension) on time and pay as much of the tax as
 possible by the original due date. At FileLater.com, you can make a payment online with your tax extension. All tax payments received by the IRS will be applied to
 your account.

By approving your payment plan request, the IRS agrees to let you pay the tax you owe in 
monthly installments (instead of immediately paying the amount in full). In
 return, you are agreeing to make your monthly payments on time. You are also agreeing to meet all your future tax 
liabilities.

Your request for an installment agreement
 will be denied if all the required tax returns have not been filed. Any tax refund
 owed to you in a future year will be applied against the amount you currently owe — if your tax 
refund is applied to your balance, you are still expected to make your regular
 monthly installment payments.

What Is an Offer in Compromise?

An “Offer in Compromise” is basically an agreement between the IRS and a taxpayer that allows the taxpayer to pay less than the full amount they owe.  The taxpayer can usually choose to make a lump sum tax payment or set up an installment plan. While this type of arrangement isn’t for everyone, the Offer in Compromise program has allowed many taxpayers to pay off their tax debts.

The IRS will accept an Offer in Compromise under a few conditions. You may be approved if the IRS comes to the conclusion that the full amount owed is otherwise uncollectable. The IRS may also permit an Offer in Compromise if you have legitimate doubt that you actually owe that amount of tax debt — called “doubt as to liability.” Lastly, in certain situations the IRS will accept a lower amount than what’s owed if full payment would cause undue hardship to the taxpayer or their family.

Installment Payment Methods

There are several methods by which you can make your installment payments, including check, money order, direct debit, or credit
 card. After the IRS receives each payment,
they will send you a notice with your remaining balance, plus the 
due date and amount of your next installment payment. Note that if you choose to have your
 payments automatically withdrawn from your bank account, you will not receive these notices in the mail — rather, your bank statement will serve as your record of payment.

If you do not make your payments on time, or you fail to pay the 
balance due on a return you file later, you will be considered “in default” on
 your installment agreement and the IRS may take action against you. This can include filing of a “Notice of Federal Tax Lien” or an IRS levy action to collect the 
entire amount you owe. To ensure that your payments are made in a timely manner,
 consider making them automatic via Electronic Funds Withdrawal (EFW).

Income Tax Extensions: Payments and Penalties Explained

Filing a tax extension gives you six extra months to file your tax return (5 months for certain business entities) But if you owe taxes, the IRS requires that you still pay by the original due date of your return (typically April 17 for individuals and March 15 for businesses).

This may seem a bit counterintuitive to many taxpayers. Isn’t the whole point of getting a tax extension so that you don’t have to pay right away?

Unfortunately, no. A tax extension gives you the time you need to prepare a completely accurate tax return, but the IRS will not wait six months to receive the taxes you owe. If your tax return comes out better than you had expected, you may get a tax refund. If it comes out worse than expected, you will have to pay the additional tax due to the IRS. Despite what you may or may not owe, you are still required to pay by the original filing deadline.

What If I Don’t Pay?

If you don’t pay your income taxes by April 17 (or your business taxes by March 15), the IRS will most likely assess a late payment penalty and interest charges which accumulate each month that your taxes go unpaid.

The late payment penalty is 0.5% of the unpaid taxes, assessed on a monthly basis, up to a maximum of 25%. For example, if you have $2,000.00 in unpaid taxes, the IRS may charge you $10.00 per month as a late payment penalty (because $2,000.00 x 0.5% = $10.00).

If your tax is still unpaid 10 days after the IRS issues a “Notice of Intent to Levy,” the late payment penalty increases to 1.0%. On the other hand, if you filed on time and you set up an Installment Agreement with the IRS, the late payment penalty decreases to 0.25%.

Keep in mind, you may not be subject to a late payment penalty if you filed a tax extension on time (by the original deadline of your return) and paid at least 90% of your tax liability with your extension. At FileLater.com, you can file your tax extension online and electronically pay your tax due using our IRS-approved e-file system.

The IRS also charges interest on any outstanding tax balance. Interest is compounded daily and accrues starting on the due date of your tax return until the day you pay your taxes. The interest rate is determined on a quarterly basis. Currently, the interest rate is equivalent to the Federal short-term rate plus 3%.

Finally, there is a late filing penalty (also called the failure-to-file penalty) which is imposed if you owe tax to the IRS and you don’t file on time. This fee is 5% of the unpaid taxes, assessed on a monthly basis, up to a maximum of 5 months. If your tax return is more than 60 days late, the minimum late filing penalty is $135 or 100% of the tax due, whichever is less.

If you aren’t sure whether you’ll be getting a tax refund or you will owe a tax payment when you ultimately file your return… don’t worry. The FileLater system can help you estimate your income taxes with our simple tax calculator. It’s just one more reason to file your income tax extension online at FileLater.com.

How to Make a Payment with Your Tax Extension

Before you complete your tax extension request, remember this important fact: a tax extension gives you more time to file your income tax return, but it does not give you more time to pay any tax that you owe to the IRS.

So, if on April 15th (or March 15th for businesses) you owe the IRS money, you are expected to pay that full amount or else you may be subject to interest, penalties, and late fees.

There are a few ways to make a payment with your tax extension using the FileLater system. Here is an explanation of the main payment options:

Electronic Funds Withdrawal (EFW) Payment

If you e-file taxes online using your personal computer — through a tax extension professional like FileLater, for example — you can make a tax payment by authorizing an Electronic Funds Withdrawal (EFW) directly from your bank account. Make sure to check with your banking institution to confirm that an Electronic Funds Withdrawal is allowed, and remember to obtain the correct routing and account numbers.

If you owe income tax to the IRS and you want to have the money electronically withdrawn from your bank account, you will be asked to agree to the following declaration:

“I authorize the U.S. Treasury and its designated Financial Agent to
 initiate an ACH electronic funds withdrawal entry to the financial institution
 account indicated for payment of my federal taxes and the financial institution 
to debit the entry to this account. To revoke a payment, I must contact the 
U.S. Treasury Financial Agent at 1-888-353-4537 no later than 2 business days
 prior to the payment (settlement) date. I also authorize the financial 
institutions involved in the processing of the electronic payment of taxes to
 receive confidential information necessary to answer inquiries and resolve 
issues related to the payment.”

The EFW payment option allows taxpayers to e-file a tax extension request online (Form 4868 or Form 7004) and 
simultaneously “e-pay” the tax that they owe. Remember that e-filing your tax extension means you don’t need to send in a paper application. You will receive a written copy
 of the EFW payment authorization once you complete the transaction. It is 
important to keep this copy for your records.

NOTE: For the most part, business entities are required to remit their Federal taxes electronically. See the specific form instructions for rules on how your business tax payments should be made.

Tax Payment by Check or Money Order

When paying by check or money order, mail your payment with the applicable tax form or voucher to the address listed in the Instructions. For example, if you e-file Form 4868 but you’d rather mail your tax payment to the IRS, you should use a completed Form 4868 as a payment voucher and mail it to the appropriate address (listed on Page 4 of Form 4868).

Make your check or money order payable to the “United States
Treasury” and DO NOT SEND CASH. Also 
don’t forget to write your Social Security Number (SSN), daytime phone number, and “[Tax Year] Form 4868” (i.e. the words “2014 Form 4868”) on your check or money order. Do not staple or 
attach your payment to Tax Form 4868.

Tax Extensions for Military Personnel

In recognition of their service, military personnel are given more flexible rules regarding income tax filing and payment. If you are a member of the U.S. military, the IRS will allow you an extension of time for taking care of certain tax matters.

There are several things you should know about military tax extensions.

Tax Extensions for Overseas Deployment

If you are serving overseas during tax filing season, you are automatically granted a 2-month tax extension (to June 15) ― with no paperwork required and no tax payments or penalties assessed. If you need more than 2 months to file your return, you can e-file IRS Form 4868 online using the FileLater system and get an additional 4-month income tax extension (to October 15).

This tax extension is designed for U.S. military personnel serving in non-combat areas. If you are deployed in a combat zone, or you move to a combat zone (from a non-combat area) while overseas, see the next section.

Tax Extensions for Combat Zone Service

If you serve U.S. military in a combat zone or contingency operation area, you have additional options for tax extensions.

The length of the tax extension is 180 days from the last day that you are in a combat zone or contingency operation area, or from the last day of any hospitalization (up to 5 years) resulting from injuries sustained in such an area. Additionally, spouses of those members of the U.S. Armed Forces serving in a combat zone or contingency operation may qualify for the same tax extensions (with a few exceptions).

This extension includes the time for tax preparation you would have had if you weren’t serving overseas. For example, if you deployed on March 1, you would earn a 226-day tax extension (180 days for the automatic extension, plus the 46 days between March 1 and April 15).

During the tax extension period, no penalties or interest will be assessed on your taxes. This extension applies to any and all taxes due ― whether from income, investments, capital gains, or other sources.

It’s important to remember that a military tax extension applies only to your time served directly in an active combat zone. If you are initially deployed to a non-combat area and then moved to a combat zone, your tax extension will only be calculated from the date you arrive in the combat zone.

Tax Deadlines That Can Be Extended

The provisions for military tax deadline extensions apply to a variety of IRS procedures, including the following:

  • Filing any return of income tax, estate tax, gift tax, employment tax, or excise tax
  • Paying any income tax, estate tax, gift tax, employment tax, or excise tax
  • Filing a petition with the Tax Court for redetermination of a deficiency, or for review of a Tax Court decision
  • Filing a claim for credit or refund of any tax
  • Bringing suit for any claim for credit or refund
  • Making a qualified retirement contribution to an IRA
  • Allowing a credit or refund of any tax by the IRS
  • Assessment of any tax by the IRS
  • Giving or making any notice or demand by the IRS for the payment of any tax, or for any liability for any tax
  • Collection by the IRS of any tax due
  • Bringing suit by the United States for any tax due

If the IRS takes any of the above actions covered by the military provision, or sends you a notice of examination before learning that you qualify for a tax extension, contact your legal assistance office. You will not be charged any penalties or interest for failure to file a return or pay taxes during your extension period.  For more information regarding military personnel, see IRS Publication 3 (Armed Forces’ Guide).

FileLater Supports Our Troops!

Beginning in tax year 2009, any military member with an active .mil email address can file a tax extension for free with the FileLater system. Start your extension now!

State Income Tax Extensions

Getting a Federal income tax extension for your Federal income taxes is simple — but what about your state income taxes? Can you get a tax extension from the state as well?

In general, it depends on which state you live and work in. Every state has different rules and regulations about income taxes and tax extensions. Some states, like Nevada and Texas, do not levy individual income taxes at all (although you may still owe taxes on business or investment income). Other states, like California and Massachusetts, have more complicated rules governing personal taxes and business taxes — so a state tax extension can be especially useful.

How Do State Income Tax Extensions Work?

Each state is different regarding their tax extension rules. For example, Colorado and California, automatically grant a six-month extension to any taxpayer and no paperwork is required. (However, note that similar to a Federal tax extension, you must still pay any state tax due by the original filing deadline).

Arizona is a state that will automatically accept an IRS tax extension if you don’t owe taxes — but you are required to fill out a state-specific tax form if you do owe taxes. Wisconsin, on the other hand, automatically grants a state tax extension if you have a Federal extension — provided that you attach a statement or copy of your Federal tax extension application (IRS Form 4868 or IRS Form 7004) to your Wisconsin tax return when you file. Finally, Pennsylvania allows many of its taxpayers to submit their tax extension requests by paper mail — while Alabama, along with numerous other states, allows its taxpayers to file their extension requests online.

Let FileLater Help You

The various state tax extension guidelines can be overwhelming. So how do you figure out your particular state’s requirements?

You can get all the information you need right here at FileLater’s State Tax Extensions center. We provide a comprehensive list of tax requirements for each state, as well as options for e-filing your state tax extension request. Whether you are filing for a business tax extension or a personal tax extension, FileLater can tell you exactly what you need to do and how to do it.

Get all of your state income tax extension questions answered at FileLater.com. If you need additional guidance, our dedicated support team is here to help!

VIDEO: Tax Extensions are Automatic

There are lot of reasons to file a tax extension. In fact, we’ve already written about the Top 100 Reasons. But maybe the best reason for getting an extension to file your taxes is that it’s automatic.

Here’s a short video explaining exactly what we mean.

Personal Tax Extensions Online: What to Expect

Are you ready to electronically submit your personal tax extension (IRS Tax Form 4868) online using the FileLater system, which will extend your filing deadline for six months for your annual Federal income tax return (Form 1040, 1040A, 1040EZ, 1040NR, 1040NR-EZ, 1040-PR, or 1040-SS)?

Congratulations! You will give yourself until October 15 to file your income taxes. This article explains the steps you will need to take to file a tax extension online with the IRS-approved FileLater system.

Step 1

The IRS requires that you provide some personal information in order to request a tax extension online. This includes your name, address, Social Security Number (or ITIN) ― and the same information for your spouse if you are married filing jointly. Other complicated tax forms (including W-2s, 1099s, and prior year returns) are not required to get a tax extension. Additionally, you can be confident that all of your data is kept secure by FileLater and shared only with the IRS.

Step 2

In order to get a tax extension, you must estimate whether you expect to owe taxes or get a tax refund. Don’t worry, this isn’t as complicated as it may sound. You can use FileLater’s helpful tax calculator to estimate your situation. Note that many of our customers simply assume a similar tax situation to the previous year. If you expect to owe any tax, you will want to make a payment to avoid potential interest and late payment penalties assessed by the IRS. FileLater can also help you make a tax payment directly to the IRS via Electronic Funds Withdrawal (EFW) directly from your bank account.

Step 3

Once you submit your tax extension using FileLater, the system will electronically file (e-file) Tax Form 4868 to the IRS for approval. Note that FileLater is an Authorized IRS e-file Provider, which means that your transaction and your information are completely secure.

That’s All It Takes

A few days after you submit your tax extension request, FileLater will send you a confirmation email notifying that your tax extension (Form 4868) has been approved by the IRS. If, for any reason, your tax extension request is denied, FileLater will tell you why ― and you can resubmit for free after making the necessary changes. Keep in mind, nearly all rejections are caused by mistakes (misspellings or Social Security Numbers that don’t match IRS records). As long as you submit your information accurately and on-time, your tax extension will likely be approved ― which is why the IRS calls it an “automatic extension.”

If you have any questions, the FileLater support team is standing by to help you.

Start your personal tax extension now!