Filing a tax extension is a common practice for both individuals and businesses. It gives you more time — typically six months, depending on your circumstances — to submit tax documents to the IRS. However, a common misconception is that filing an extension gives you more time to pay your taxes. That isn’t the case. An extension only gives you more time to file your return, but the deadline for payment remains unchanged at April 15.
When you work with a tax advisor like Mowery & Schoenfeld, obtaining a federal tax extension does not require signing forms or completing paperwork. We typically file extensions electronically on your behalf directly with the IRS.
If you’re not working with our tax professionals, getting a tax extension is straightforward. Simply submit Form 4868 online (for individuals) or on paper by April 15, which is the tax filing deadline. Business entities and trusts request extensions using Form 7004, rather than Form 4868.
If April 15 falls on a weekend or holiday, you have until the next business day to file. Here’s how the extended deadlines break down:
- Individual taxpayers and C-Corporations: The extended deadline is Oct, 15.
- Trusts: The extended deadline is Sept. 30 (five-and-a-half months after the original deadline).
- Partnerships and S-Corporations: The extended deadline is Sept. 15.
- Taxpayers living abroad: These taxpayers automatically receive an additional two months to file (until June 15), with the option to request more time if needed. While the filing deadline is extended, interest on any unpaid tax generally continues to accrue.
This means most taxpayers get until Oct. 15 to file, but trusts, partnerships, and S-Corps have earlier deadlines, and those living abroad get an automatic extension but may request more. Always double-check your category to avoid missing the correct deadline.
In many cases, making a federal tax payment online by the original filing deadline automatically triggers an extension, even without filing Form 4868 separately. This allows taxpayers to get additional time to file while ensuring payments are submitted on time.
Key Points to Know About Tax Extensions
It’s essential to know the following points about tax extensions to ensure you don’t make a costly mistake:
- Payment deadline stays the same: While an extension grants extra time to file tax returns, it does not extend the time to pay any taxes owed. Payment is still due by the original IRS deadline, and you must make a “good faith” estimate of what you owe.
- Length of the extension: For most taxpayers in the United States, an extension offers up to six additional months to file, moving the deadline to Oct. 15. Taxpayers living abroad receive an automatic two-month filing extension. Some returns, including certain trusts, receive a shorter extension (typically about five-and-a-half months).
- Who can file for a tax extension: U.S. citizens and resident aliens can use Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) to request an extension. This form is applicable for those filing Form 1040, 1040-SR, 1040-NR, and 1040-SS. There are no income restrictions, special qualifications, or explanations required to request an extension. You can file for any reason.
- Automatic approval: The IRS does not review or approve extension requests on a case-by-case basis. As long as Form 4868 is submitted by the original filing deadline, the extension is granted automatically.
Payments and Penalties
Filing an extension doesn’t mean you get extra time to pay your taxes. You are still required to estimate and pay any taxes owed by the original deadline. If you don’t pay your full tax balance by the deadline, or a good faith estimate of your remaining balance, the IRS treats the unpaid amount as late, even if you have filed an extension. That means penalties and interest begin to accrue immediately after the due date on any unpaid taxes.
Specifically, the IRS generally charges a penalty of 0.5% of the unpaid tax per month (or part of a month), up to a maximum of 25%. Interest also accrues on unpaid taxes starting the day after the original due date, until the balance is paid in full. The interest rate is set quarterly as the federal short-term rate plus 3% and is compounded daily. Making even a partial payment by the deadline can help reduce your penalties and interest charges, so it’s critical to make a payment by the deadline to avoid unnecessary charges.
Impacts of Tax Extensions
Filing an extension on your federal taxes does not change other tax deadlines. Besides the payment deadline staying the same, state tax deadlines, estimated tax payments, information returns, payroll filings, and other compliance requirements are not typically extended by filing a federal extension. Check for any other deadlines relevant to your situation to avoid costly mistakes. Also, remember that a tax extension does not change the IRA contribution deadline, which remains April 15.
State filing requirements may differ
Filing a federal tax extension does not automatically extend state filing deadlines. Some states require separate extension forms and may have signature requirements. For example, states like New York require their own extension filings. Be sure to confirm state-specific requirements to avoid penalties or missed deadlines.
Common Reasons for Filing Tax Extensions
There are plenty of reasons you might want to file for a tax extension. You don’t have to explain why to the IRS, but here are some situations where taking extra time could really help:
- Missing or late documents: You might need more time due to delayed tax documents such as Schedule K-1s, 1099s, or brokerage statements.
- Complex tax situations: Complicated returns or significant business activity can require additional time for thorough preparation. If you have many sources of revenue, for example, you might need an extension to gather all the information and strategize with a tax advisor.
- Major life events: If you are in the middle of moving, welcoming a child around tax time, experiencing the loss of a loved one, or getting married ahead of the deadline, you might need more time for the tax filing. This also includes changes in life circumstances that may affect your tax picture and require more time to gather and review information.
- Disaster impacts: If you have been affected by a disaster, you may be eligible for additional filing time. The IRS provides guidance based on the year the disaster happened and a list of eligible disaster locations for those affected.
Risks and Best Practices
Filing an extension allows time to plan and file, but it is important to use this extra time wisely and not delay until the last minute. Use the extension period to finalize documents, check estimated payments, and make any necessary adjustments. It is recommended to complete filing as soon as possible rather than waiting until the extension deadline approaches.
As long as you pay your tax liability by the April 15 deadline, there are no risks associated with filing an extension. If you do not pay on time, you will face interest and penalties and possibly delays in receiving a refund if you are owed one.
Working with a tax advisor can help ensure that the extension period is used effectively and that your return is completed accurately and on time, especially if you are a high-net-worth individual or have complex taxes. If you have questions or need assistance with your tax filings, reach out to our tax professionals for support.
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