Understanding Tax Extension Forms

Millions of Americans request more time to file their tax forms every year.
Millions of Americans request more time to file their tax forms every year.
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Have you ever had a tax deadline sneak up on you? You have your papers ready and keep reminding yourself to just fill out the returns, but suddenly it's March and then April, and you just need more time.

It happens. Nearly 13 million taxpayers requested an extension in 2014 [source: IRS]. Extensions come in handy if you need more time to get your paperwork in order, or if you want to postpone contributing money to an individual retirement account. And they're relatively easy to come by if you file before the appropriate deadline and know which form to use. Individuals and married couples file one type of form, businesses use another, and if you are living outside of the U.S., you file something completely different.

Filing an extension form doesn't cost anything if you expect a refund. If you expect to owe tax, it won't give you a payment extension. You'll have to send an estimated payment or at least a partial payment to avoid a late fee. And you'll owe interest on any balance due.

Those who live in states that tax income must file a state extension form, too. A few states offer automatic extensions. There are also automatic federal and state extensions available to individuals who live and work full-time outside of the country or those who are assigned to active combat duty outside of the U.S.

Read on to find out how tax extension forms work and how to file a federal and state income tax extension.

Who Qualifies for Tax Extensions?

Whether you're filing as an individual or part of a couple, you qualify for an extension.
Whether you're filing as an individual or part of a couple, you qualify for an extension.
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The IRS allows federal taxpayers to extend their tax deadline as long as the extension request is made no later than the original or standard tax due date. For most of us, that's April 15. As long as you get your forms in on time, the extension is automatically granted. That means you can have six additional months to file, bringing your tax deadline to Oct. 15. That's generally the maximum amount of extra time granted.

No matter how you file as a taxpayer, you qualify for an extension. If you file as an individual, you file for an extension as an individual. The same goes if you file as a couple. If you're married and file separately, the extension will apply to the spouse who requested it. The information you include on your extension form should match what you include on your tax return.

States allow for extensions, too, but each has its own set of rules for how to file. There are seven states without income taxes at all and two additional states with no income tax on wages (but dividends and interest are taxed there). Three states — California, Wisconsin and Alaska — give residents an automatic state extension [source: TurboTax]. Refer to your state government website for links to local tax extension forms and information.

Filing an extension is free. If you owe taxes, however, there's no extension of your payment due date. Whether filing federal or state taxes, you must still file your return and pay estimated taxes by the original tax deadline. Otherwise, you'll be charged for each month or partial month that it's unpaid — up to 5 percent of your bill per month or partial month in which you're late, or up to 25 percent of your total bill.

If you don't file an extension and owe tax, you'll pay a late filing fee on top of interest. For those who make a payment later than 60 days after the due date, the penalty is at least $135 or 100 percent of your total bill [source: IRS].

Types of Tax Extensions

Military personnel on duty overseas get an automatic tax extension.
Military personnel on duty overseas get an automatic tax extension.
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Some individuals qualify for even more time. Armed forces members serving or hospitalized in an active combat zone get 180 days to file after returning home. Plus, you get the amount of days that you could have had to file taxes before entering the combat zone. This happens automatically, and these folks don't need to file an extension form [source: TaxAct].

Members of the military on duty outside of the United States and Puerto Rico get an automatic two-month extension and have until June 15 to file.

The same rules apply to citizens or residents of the U.S. who live and work outside of the country or Puerto Rico. Those people typically owe taxes by June 15, but if you need more time to prove that you're a bona fide resident of a non-U.S. country, file Form 2350, Application for Extension of Time To File U.S. Income Tax Return [source: IRS].

Business tax filers can also get an extension, and most can file Form 7004. In general, partnerships, LLCs, trusts and estates fill out Part One, on line 1a, for a five-month extension, and corporations (C corps and S corps) fill out Part Two, on line 1b, for a six-month extension. There are some exceptions with estates or multi-partner LLCs. If you are a freelance or contract worker and file taxes as an individual, opt for the individual Form 4868 for your extension.

If you typically file in April, the due dates are the same as those for individuals and joint filers, but for corporations, income tax extensions go by fiscal year. Be sure to file on or before the 15th of the third month after the end of your tax year — which means if you are a calendar-year taxpayer, you file by March 15.

What If You Can't Pay Your Taxes?

Credit cards could prove to be a viable option for paying your taxes in a pinch, but watch out for fees.
Credit cards could prove to be a viable option for paying your taxes in a pinch, but watch out for fees.
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If you're seeking an extension because you can't pay your taxes, the IRS recommends filing and paying what you can by April 15 instead. There are no payment extensions, and the penalty that occurs when you fail to pay will only increase your bill.

The IRS offers payment options for those in a financial bind. Those owing less than $50,000 in tax and interest can file an Online Payment Agreement application to make installment payments over time. Taxpayers owing more than $50,000 need to file Form 433F, the Collection Information Statement. You can learn more about these options or negotiate some other sort of plan by contacting the IRS directly [source: IRS].

There can be advantages to using a credit card to pay a tax bill rather than risking late-payment charges and interest. If the card has a low interest rate, offers reward points and can be paid back in a timely way, a credit card is a viable and even attractive option [source: Karimi]. Just be aware that IRS payment processors charge fees for both debit and credit payments. Debit cards incur flat fees of less than $3, but credit cards can incur a fee as high as 2.35 percent of the taxes you owe [source: IRS].

To prevent hefty tax bills in the future, it's easy to change the amount withheld from your paycheck. By reducing the amount of total exemptions and withholdings, you can increase your regular tax payments to the IRS. Most payroll providers allow employees to change withholdings directly on the web. You also can contact a human resources representative to discuss the process.

How to File an Extension

If you owe taxes and need an extension, you'll still need to estimate what you owe and pay what you can by April 15.
If you owe taxes and need an extension, you'll still need to estimate what you owe and pay what you can by April 15.
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To request a federal tax extension, file Form 4868. The form is relatively easy to fill out. It asks for name, address and Social Security number for yourself and a spouse, if applicable.

The most difficult part of the form likely will be estimating the taxes you owe, but you have to do it. There are plenty of online calculators to help you estimate your tax liability. If you don't have a sense of total income and exemptions for this year, you can try to estimate based on your prior year's tax returns. If you made 10 percent more this year, adjust the numbers upward by 10 percent.

You can file your federal extension online through Free File on IRS.gov or mail a paper copy to the IRS according to where you live. More than 62 million taxpayers filed taxes electronically in 2014, and the IRS encourages taxpayers to use the web as fast and easy option.

If you owe a payment, you can pay electronically through the Electronic Federal Tax Payment System. You can also make a direct payment through your checking or savings account, or by using a debit card or credit card. In fact, you don't need to file Form 4868 at all if you make any type of electronic payment. The IRS automatically grants an extension if you pay online or by phone [source: IRS].

Tax software programs can also help with payment processing. If you prefer, you can send a check or money order to the federal or state treasury along with a paper copy of Form 4868 [source: IRS]. Any refund you might be expecting will be processed by the IRS after you file your actual returns.

For a state tax extension, look to your state website to find the appropriate tax form. You can start with the IRS State Tax Extension Information site. If you're using tax preparation software, it should include instructions on how to file both state and federal extensions through the software provider.

After the extension has been mailed, it's automatically applied. That means you can assume it was received, and you won't receive notice from the IRS. Then file your returns as you normally would, on or before the Oct. 15 deadline. You don't have to include another copy of the Form 4868 when you file your return.

Author's Note: Understanding Tax Extension Forms

Retirement savers generally don't get extensions for contributing for the year. If you want to make a contribution to a traditional individual retirement account or Roth IRA in 2014, you have until April 15, 2015, to do so, even if your taxes aren't due until Oct. 15.

However, self-employed and small-business owners might be eligible for an IRA contribution deadline extension. If you have self-employment income from freelance or contract work, you have until your due date to open and make contributions to a simplified employee plan or SEP IRA for the prior year. That means if you file an extension, you have until Oct. 15. You also have until your extended due date to contribute to a savings incentive match plan for employees or SIMPLE IRA, if you have already opened one. Both options offer a nice potential tax deduction, so it's worth trying to scrape the money together and contribute.

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Sources

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