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Too Busy For Tax Season? Consider a Filing Extension

By Eileen Corbett, JD, LLM | April 14, 2014

Too Busy For Tax Season? Consider a Filing Extension

With April 15th looming on the horizon, you may be wondering how - or when - you’ll be able to get all of your tax materials together in time to file. If that is the case, then you might want to check with your advisor about requesting an extension of time to file your return. This popular option provides some extra time to get your documents in order and file your return.

Tip

The forms used to request an extension are generally due by the original due date of the return. For example, if your return is due by April 15th, then you must file your extension request by April 15th. Before filing any extension, check with your advisor.

Individuals and sole proprietors must file their calendar year Form 1040, U.S. Individual Income Tax Return by April 15th. An extension of time to file would provide an additional six months, until October 15th, to file the return.

Warning

An extension of time to file a return is not an extension of time to pay the tax. Even if you obtain an extension of time to file, make sure you pay enough tax by April 15th.

April 15th is also the deadline for many partnerships that file Form 1065, U.S. Return of Partnership Income. Calendar year estates and trusts also must file their Form 1041, U.S. Income Tax Return for Estates and Trusts, by April 15th. However, the partnership or trust or estate may request an automatic 5-month extension of time to file, which generally extends the due date to September 15th, 2014.

Think Ahead

If you are still waiting for a partnership Schedule K-1, Partner's Share of Income, Deductions, Credits, etc. as April 15th approaches, talk to your advisor about requesting an extension of time to file your Form 1040.

Form 4868 for individual returns. To request an automatic six-month extension of time to file their Form 1040, individuals and sole proprietors generally file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. You do not have to explain any reason for requesting the extension on Form 4868, but you do enter your estimated tax liability on the form. The various ways to file this form include using a tax professional, tax preparation software with built-in electronic filing, the Electronic Federal Payment Tax System (EFTPS), or mailing a paper form.

Form 7004 for business and other returns. Many business entities file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns to request an automatic extension of time to file their return. This includes partnerships (Form 1065), C corporations (Form 1120, U.S. Corporation Income Tax Return), S corporations (Form 1120S, U.S. Income Tax Return for an S Corporation), and estates and trusts (Form 1041). The chart below provides a summary of popular calendar-year due dates for various entities.

Summary of Popular Return Filing Due Dates and Extended Due Dates
       
  Original Due Date
for Filing Return
Form to Request
Extension to File
Extended Due Date
for Filing Return
       
Form 1040
Individuals
April 15 Form 4868 October 15
Form 1065
Partnerships
April 15 Form 7004 September 15
Form 1041
Estates and Trusts
April 15 Form 7004 September 15
Form 1120S
S corporations
March 15 Form 7004 September 15
Form 1120
C corporations
March 15 Form 7004 September 15

According to the IRS, it will not notify you that your Form 7004 extension has been approved. It will only notify you if your Form 7004 extension is disallowed.

Pay on Time to Avoid Interest, Penalties

An extension of time for filing a return does not extend the due date for paying the tax. Interest and penalties may be imposed not only for failing to file, but also for failing to pay.

The failure-to-pay penalty is generally 0.5 percent of your unpaid taxes per month, or part of a month, after the due date that taxes are not paid. It could add up to as much as 25 percent of the unpaid taxes.

The failure-to-file penalty is a separate penalty and is typically 5 percent of your unpaid taxes per month, or part of a month, that the return is late. This separate penalty also could add up to as much as 25 percent of your unpaid taxes. In some cases, the minimum penalty is either $135 or 100 percent of your unpaid tax, whichever is less.

If you will not be able to pay the tax on time, check with your advisor for possible alternatives. It is generally best to pay the tax to the IRS when it is due. However, for those unable to do so, some options do exist, such as installment agreements or offers in compromise.

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