Federal tax returns are usually due on April 15 each year. If the 15th falls on a weekend or holiday, they’re due on the first business day after that. However, the IRS grants you an automatic extension to file your taxes each year as long as you complete Form 4868. Some common reasons for requesting a tax extension include unanticipated life events or difficulty locating the correct tax planning documents. But even if you get an extension to file, you must still pay your taxes in full by the tax deadline.
What Is a Tax Extension?
A tax extension typically gives you until October 15 to file your tax return. However, if you’re a US citizen or resident alien living outside of the US and Puerto Rico, you’re allowed an extra two months (usually until June 15) to file your tax return and remit any taxes due without asking for an extension. This also applies if your main place of business (or duty location for military personnel) is outside the US and Puerto Rico. If you need more than the extra two months, you can apply for a further four-month extension.
If you owe any taxes, you’ll need to make the payment by the April filing deadline to avoid penalties and interests. If you cannot pay the full balance due, you should still file your tax return to avoid a failure-to-file penalty. Moreover, you can apply for an installment agreement with the agency online or via Form 9465.
When to File for a Tax Extension
You can file for a tax extension for any reason. Whether you’ve been out of town, don’t have the right paperwork, or are facing an emergency, you might need extra time to file your taxes. Regardless of your reasoning, an extension gives you more time — up to six extra months — to submit your paperwork to the IRS.
Some common reasons you may need a tax extension include:
Incomplete Tax Documentation
The federal government will grant you a tax extension just for the asking. So, take advantage of this extra time to ensure you file an accurate return. For instance, if you misplaced the W-2 your employer sent and you’re waiting for a duplicate to arrive, you can file for the extension and wait for your W-2. If you were to estimate your income, you’d likely have to make corrections in the future.
Unexpected Life Events
Sometimes, life events can interfere with your ability to file your return. If you have an illness or death in your family or suffer a natural disaster, you may fail to file your taxes on time. It’s best to avoid preparing your tax return in a rush if unexpected issues keep you from focusing on the task. Regardless of your reason for filing for a tax extension, always consult with an experienced tax accountant to avoid any compliance issues.
IRA Conversions
Taking more time to file your return may help you obtain extra tax savings. For example, converting your traditional IRA into a Roth IRA means that you must pay tax on the entire account balance during the conversion. Fortunately, the IRS allows you to revert your Roth IRA back into a traditional IRA any time before you file your return. This allows you to defer paying taxes on the balance. Because this conversion often takes time, filing an extension can eliminate your obligation to remit the tax.
Late Payment Penalties
If you fail to pay the taxes you owe by the deadline, you can incur severe IRS penalties regardless of when you file your return. The agency will charge you one-half percent every month on the amount of tax you owe after the deadline. If you fail to file your return by the extension date, the penalty increases to 5 percent each month up to a maximum penalty of 25 percent. To avoid these fees, be sure to make a tax payment using your debit card before the deadline. This payment method typically serves as your extension application, helping you avoid filing Form 4868.