What You Need to Know About Individual Tax Extensions
Basic Rules for Individuals
For individual taxpayers, the Internal Revenue Service (IRS) grants a six month extension to file your taxes each year as long as you complete Form 4868.
Filing an extension does not remove a taxpayer’s obligation to pay their income tax by April 15th. Taxpayers are expected to pay income tax to the IRS on time or they will be subject to late fees, penalties, and interest. This means taxes owed should be remitted by April 15th, regardless of an extension request.
Taxpayers have a few extra days this filing season. April 15th falls on a Sunday and Emancipation Day in the District of Columbia is observed on April 16th, resulting in a due date of April 17, 2018 for 2017 returns.
The extension allows taxpayers to gather all information needed to file a complete and accurate return without being assessed a late filing penalty. Taxpayers with complicated tax returns and those who have invested in partnerships or S Corporations and do not receive their K-1s until after the original April 15th due date should request extensions. The entities may have extended their own due dates, resulting in returns not being required to file until September 15th, with extensions.
A Federal income tax extension is good for six months, which extends an individual taxpayer’s filing deadline from April 15th to October 15th.
Penalties
Regardless of when an individual files a tax return, if the tax owed is not paid by the original filing deadline (April 15th for individuals), the IRS will assess penalties. The IRS will charge 0.5% each month of the amount of tax owed after the deadline.
When a taxpayer fails to file a return by the extension date, the penalty increases to 5 percent per month and subject to a maximum penalty of 25 percent.
State Extensions
The rules on state extensions are similar to those of the Federal. If the taxes are not paid by the original due date, there may be late payment penalties and interest. Some states do not require a separate extension to be filed if there is no tax due. For example, New Jersey grants an automatic extension of 6 months if there is no balance due and a Federal extension is filed. New York, on the other hand, requires an extension filing even if there is not a tax due with the return.
If you’re interested in learning more about how to manage your taxes, contact KRS today for a complimentary initial consultation.
