Filing Extension

What Is a Filing Extension?

A filing extension is an exemption that can be made to either individual taxpayers or businesses that are unable to file a tax return to the federal government by the due date. Individuals can complete and file IRS Form 4868 by the regular date of their return–which is usually April 15—for an automatic six-month extension. Most business tax returns can be extended by filing IRS Form 7004.

However, the extension of time to file does not provide a corresponding extension for payment of taxes owed. An explanation of the reason for the extension is not required. Some states accept IRS extensions, but others require taxpayers to file a separate state extension form.

Key Takeaways

  • A filing extension is an exemption that can be made to either individual taxpayers or businesses that are unable to file a tax return to the federal government by the due date.
  • Individuals can complete and file IRS Form 4868 by the regular date of their return—which is usually April 15—for an automatic six-month extension.
  • Most business tax returns can be extended by filing IRS Form 7004.

How a Filing Extension Works

Taxpayers who cannot pay their taxes will not only not gain anything by not filing an extension, they will also pay a much greater penalty than those who file and cannot pay. The failure-to-file penalty is usually 5% of the total amount owed per month—and can go as high as 25%—while the failure-to-pay penalty is only 0.5% of the amount owed per month. The interest runs until the tax is paid in full. Beginning with returns due after Dec. 31, 2019, if a return is more than 60 days late, the additional tax is $435 or 100% of the amount due, whichever is less, an increase from $330.

There are three ways for a taxpayer to request an automatic extension of time to file an individual tax return:

  1. Pay all or part of their estimated income tax due and indicate that the payment is for an extension
  2. File Form 4868 electronically by accessing IRS e-file using a home computer or with the help of a tax professional who uses e-file
  3. File a paper Form 4868 and enclose payment of the estimate of tax due.

U.S. citizen and resident taxpayers who are out of the country on the regular due date are allowed two extra months to file returns—and pay any amount due—without requesting an extension. However, interest will still be charged on payments made after the regular due date, without regard to the extension.

For businesses organized as C corporations, the filing extension is due by the 15th day of the fourth month after the end of its tax year. For businesses organized as S corporations, the income tax return or extension is due by the 15th day of the third month after the end of its tax year. For businesses organized as partnerships, the extension is due by the 15th day of the third month after the end of its tax year. For example, the due date for an extension of an S corporation with a fiscal year ending April 30, 2020, would be July 15, 2020.

Article Sources

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  1. Internal Revenue Service. "Here's How Taxpayers Can File an Extension for More Time to File Their Federal Taxes." Accessed Feb. 5, 2020. 

  2. Internal Revenue Service. "About Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns." Accessed Feb. 5, 2020. 

  3. Internal Revenue Service. "Form 4868: Application for Automatic Extension of Time to File U.S. Individual Income Tax Return," Page 1. Accessed Feb. 5, 2020. 

  4. Internal Revenue Service. "IRS provides tax inflation adjustments for tax year 2021." Accessed Dec. 13, 2020. 

  5. Internal Revenue Service. "2019 Instructions for Form 1120: U.S. Corporation Income Tax Return," Page 3. Accessed Feb. 5, 2020. 

  6. Internal Revenue Service. "2019 Instructions for Form 1065: U.S. Return of Partnership Income," Page 5. Accessed Feb. 5, 2020. 

  7. Internal Revenue Service. "2019 Instructions for Form 1120-S: U.S. Income Tax Return for an S Corporation," Page 3. Accessed Dec. 13, 2020. 

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