Understanding Tax Extensions & Ensuring You Don't Get Penalized
The dirty little IRS word that too many people are afraid of…EXTENSION!
Let us break it down so it’s not so scary.
The IRS allows a legal extension of time to file your return, whether for business returns or individual returns, trusts and estates, and non-profits for that matter. No problem! They have a procedure for it! Use the appropriate form and make sure it’s postmarked on or before the due date and you automatically get approval for additional time to file your taxes.
The IRS considers an extended tax return filed on time as long as the return is received on or before the new extended deadline! Simple!
So, let’s say you had an Offer In Compromise that was approved by the IRS for a prior year. You are required to file your tax returns on time for the following five years in order to be compliant with the terms of the agreement. IF you file an extension are you still compliant with the IRS??? Why, of course! You are allowed to file an extension and have it automatically accepted for more time just like everyone else. No problem!
“Too simple to be true”, you might be saying. Maybe you’re asking, “What’s the catch?” Well, that’s a great question, because there is a catch! The IRS may allow you more time to file your return, but they don’t allow you more time to pay your tax! And if you don’t have enough paid in, they will levy penalties like crazy because they can.
We know the rules, however, and can keep those penalties at bay so you can file an extension with peace of mind knowing that the IRS won’t be penalizing you!
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For Partnership and SCorp Business returns, they are due on March 15th, but when you file an extension on Form 7004, you are allowed a six-month extension to file your return with a new due date of September 15th.
For Individuals, Trusts and Estates (for year-end filers) and Corporate Business returns, they are due on April 15th, but when you file an extension on Form 4868 for 1040, Form 7004 for 1120 and 1041, you are allowed a six-month extension to file your return with a new due date of October 15th.
For Non-Profit returns, they are due on May 15th, but when you file an extension on Form 8868, you are allowed a six-month extension to file your return with a new due date of November 15th.