Why would you need a tax extension? There are several good reasons:
- You haven't collected all the tax documents and forms you need, and require more time.
- You're ill or have suffered an injury, and don't have the capacity to complete your taxes.
- You're traveling or living outside the country or working overseas for a few months, and won't be back until after April 15.
If any of the above reasons apply to you, filing for an extension can buy you the time needed to complete your taxes thoroughly and accurately.
Filing a tax extension not only buys you more time to complete your tax returns, it enables you to avoid any late-filing or late-payment IRS penalties. That doesn't mean you avoid actually paying any taxes owed to Uncle Sam. Under federal law, even if you file for a tax extension, you still have to estimate the money you'll owe, and forward it to the IRS on or before April 15, 2020.
If you don't have the money to pay the IRS, contact the tax agency directly and work out a payment plan so your debt to the U.S. government is paid in full.
When Is the Tax Extension Deadline?
For the 2019 tax year, the tax extension deadline is Oct. 15, 2020. If you're only partially done with your tax returns and need more time to file, then a tax extension could be the ticket for you.
How to File for an IRS Tax Extension
Filing for an IRS tax extension is a straightforward process, with two primary options in play.
1. Use IRS Form 4868
Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Print out the form, complete it, and send it to the IRS. Make sure to use the IRS address that is applicable to your state.
Note that you can file Form 4858 by mail (simply print out a copy of your completed form and mail it to the IRS) or file it electronically through the tax services firm that handles your taxes (like Turbo Tax, H&R Block (HRB) - Get Report , or your local tax accounting service.)
If you're sending the IRS an estimated payment electronically, you don't need to file a Form 4868 at all. Instead, the IRS will note your estimated payment and grant you an automatic extension.
2. Go With a Pro
If you do use a professional tax service, they can file your tax extension for you.
For example, both Turbo Tax and H&R Block offer an e-filing federal tax extension filing option. Your tax professional will handle all the paperwork, and will alert you that the IRS has your tax extension paperwork and that is has been accepted by the tax agency.
In some cases, depending on which state you reside, your only option is to mail your tax extension form - be sure to check with your tax professional and see if you can mail or electronically file your state tax extension form. Or, check with your state's tax office or office of tax revenues for more information.
The American Institute of CPAs (AICPA) offers a handy list of tax offices in all 50 U.S. states.
When you get the OK from the federal government on a tax extension, you have until Oct. 15, 2019 to file your taxes. If you anticipate earning a tax refund, you won't get it until your taxes are filed and processed by the IRS.
How to File an Extension Outside the U.S.
If you reside outside the U.S., but need to square away your taxes with the federal government, using Form 4868 won't get the job done.
Instead, use IRS Form 2350: Application for Extension of Time to File U.S. Income Tax Return.
This tax form is for U.S. citizens and resident aliens who live abroad who require an extension, and file their taxes using Form 2555 or 2555-EZ. In this scenario, taxpayers abroad may need additional time also to clear the U.S. bona fide resident test or the IRS' physical presence test to meet the standard for the foreign earned income exclusion, or the foreign housing exclusion mandates.
Why Might the IRS Reject a Tax Extension?
In most circumstances, the IRS will approve a taxpayer's request for an extension, but not every time. In the following scenarios, a taxpayer can expect problems in asking for an extension:
- Your payment estimate is way off. If the IRS deems your tax payment estimate to be out of whack, or otherwise problematic, they may well reject any request for a tax extension.
- If you underestimate your tax payment level, not only will you likely be rejected for an extension, you'll also have to pay extra interest on the amount of tax payments that were underestimated. Again, the due date for IRS payments is April 15, 2019 - and that's when the meter will start running on interest owed on payments not made to the IRS.
- Under IRS statutes, any tax payments under 90% of the amount you owe to the federal government, you'll incur a tax penalty amounting to .05% of the amount underpaid for each month or part of a month that a tax return is late.
In the event your request for a tax extension is rejected by the IRS, you have the option to re-apply and potentially make a stronger case to gain IRS approval.
The key here is to file your tax extension as early as possible - way before April 15, ideally. That way, if you do get the thumbs down on an IRS tax extension request, you can still refile your request before the April tax deadline date.
What Happens if You Miss the Tax Extension Deadline?
It's no surprise the IRS runs out of patience if you miss filing your tax returns on the Oct. 15 deadline, you'll face a slew of problems:
Interest payments will grow. The meter will keep right on running on any interest owed on unpaid taxes. Let the deadline slip for too long and your debt to Uncle Sam really starts adding up.
Your late payment penalty can rise. While the IRS does charge a 5% rate on any outstanding taxes owed if not paid by the April 15 deadline, the agency has the right to raise that penalty rate, up to 25%, if you haven't filed your taxes by the Oct. 15 deadline.
You'll incur additional tax penalties. On top of the aforementioned tax penalties owed, the IRS can also stick you with an additional late payment 5% tax penalty for any taxes owed after Oct. 15. Once again, the max IRS penalty can slide up to 25%, at IRS discretion.
The IRS actually cuts taxpayers a break if they can't file their taxes by the original April 15 deadline. As long as you pay the correct estimated tax you owe, and file your tax returns by Oct. 15, you'll be in the good graces of the IRS and still have taken advantage of an additional six months to get your taxes done right - with Uncle Sam's full support and approval.