Individuals usually have to file their federal income tax returns by April 15, but that date was moved forward to May 17 in 2021 to give Americans more time to prepare their financial information while coping with restrictions imposed to curb the pandemic. Although this would seem to give taxpayers plenty of time, the IRS still expects to receive about 10 million requests to extend the deadline.
Can’t File by the Deadline: Top 3 Reasons to File a Tax Extension
If you are like most people, you probably do not relish the prospect of dealing with the IRS. However, the agency grants extensions automatically, which means taxpayers do not have to explain themselves to IRS employees in order to get more time to file their returns. If you need an extension, all you have to do is complete and submit a Form 4868 in a timely manner.
You will then have until October 15 to prepare and submit your income tax return. If you need an extension, you are not alone. Millions of Americans receive extensions each year for a variety of reasons. The most common reasons for requesting an income tax filing extension include:
- Missing paperwork: Forms like W2s and 1099s must be submitted to the IRS along with income tax returns. When these forms are sent out to taxpayers late or get lost in the mail, requesting an extension is probably wiser than submitting an incomplete return. This often happens when taxpayers move or change jobs.
- Travel: Being in another part of the country or overseas when tax paperwork is mailed out could make filing a tax return by the deadline impossible. This has become less of a problem in recent years as W2s and 1099s can now be downloaded remotely and tax returns can be filed online.
- Procrastination: Dealing with taxes is rarely something people look forward to, which is why many Americans put this chore off until the last minute.
The Pros and Cons of Filing a Tax Extension
While filing a tax extension is simple and free, it may not always be the best course of action. Here are some of the pros and cons of asking for more time to file your taxes:
- Pro: Simplicity. The IRS has made getting an extension extremely easy. You can even fill in and submit the Form 4868 online.
- Con: Taxes are still due. An extension gives you more time to submit your tax return, but it does not change the date taxes are due. Paying taxes late can lead to penalties and interest charges even if the IRS extended the filing deadline.
- Pro: Less stress. Looming deadlines can be very stressful, and this is especially true when a powerful government agency like the IRS is involved. Having a few extra months to prepare and submit your tax returns could ease this stress and give you more time to review your return and catch mistakes.
- Con: Delayed refunds. If you are expecting an income tax refund, filing an extension will add months to the time you have to wait for it.
- Pro: Avoid penalties. Failure-to-file penalties are charged monthly and can reach as much as 25% of the total taxes due. You will not have to pay these penalties if you ask for an extension. You could also take advantage of any tax breaks the government introduces between the filing deadline and October 15.
- Con: A payment plan could make more sense. If you owe taxes and do not have the money to pay them, asking the IRS for a payment plan could be smarter than requesting an extension. You will still be charged penalties and interest, but the rate will be lower.
Extensions for Those Serving in a Combat Zone
Members of the U.S. armed forces can submit the same paperwork as civilians to receive a tax extension, but a Form 4868 is not needed from service members who are deployed to an area designated a combat zone. In this situation, the IRS grants a 180-day extension automatically that begins when hostilities cease or the service member leaves the combat zone. Service members who are being treated in hospitals for injuries they suffered in a combat zone also receive this automatic extension.
IRS Tax Extension Form 4868
Completing an IRS Form 4868 should take you no more than a few minutes. The only information needed is your name, address, social security number and your 2020 tax payments and estimated 2020 tax liability. There are also boxes to check if you are a U.S. citizen or permanent resident who is out of the country or did not receive wages subject to income tax withholding. If you owe taxes, you can reduce the penalties and interest you will have to pay by paying all or part of your obligation with a credit or debit card or by using Direct Pay or the Electronic Federal Tax Payment System.
Tax Extension Rejection Instructions
While the process for getting an income tax extension is fairly straightforward, mistakes are made and extension requests are sometimes rejected. This usually happens when the information on a Form 4868 does not match what the IRS has on file. If your Form 4868 is rejected, you will get a letter from the IRS telling you why. You will also be given a few days to correct the mistake and resubmit the form. Common reasons for a rejection include:
- The form 4868 was received after the filing deadline
- Some numbers were misplaced or words misspelled
- The Form 4868 contained information that is out of date
Avoiding Tax Problems
Asking an experienced professional to assist you with your tax return is a good way to avoid problems with the IRS. The preparers and experts at Tax Crisis Institute have been helping Orange County, Bakersfield, Los Angeles and Las Vegas residents with tax issues for three decades, and their primary goal is to make sure that you do not pay more than you have to. You can set up an appointment by calling one of our offices or completing our online form.