A Tax Fact from The Tax Institute at H&R Block

Tax procrastinators take note … you are not alone.  Last tax season millions of taxpayers asked for an automatic six-month extension until October 15.
 
You may obtain an automatic six-month extension to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The form and instructions are available at the IRS website: http://www.irs.gov/pub/irs-pdf/f4868.pdf

A key point to remember, however, is that an extension to file is not an extension to pay. Whether you file your return, or request an extension, you should pay as much of any balance as possible at that time. There are several options for filing an extension and/or paying a balance due that you may want to consider:

By mail. Mail the Form 4868 and your check for the estimated balance due (if any). By including a check for the balance due, you avoid additional penalties and interest from the Internal Revenue Service.  Be sure to check the Form 4868 instructions for the correct mailing address for filing your extension.

Tax software. You may e-file Form 4868 using a purchased tax software program such as H&R Block TaxCut^® or by going through a tax professional. You may pay a balance due by electronic funds transfer from your checking or savings account as late as April 15, or you may wish to mail a check. If you e-file, you will receive a confirmation number indicating that your return was received. Be sure to write the confirmation number down and keep it in a safe place.

Paying part of the tax due by credit card. You can pay through an outside service provider listed on Form 4868. A fee will be charged for the service.

Individuals outside the U.S. If you are residing outside of the U.S. on April 15, you have an automatic two-month extension to June 15 to file. You do not need to request this extension or submit any forms. If you need more time than this, file Form 4868 by June 15 to get an additional four-month extension to October 15. Note: You are not entitled to the automatic two-month extension if you are merely taking a vacation or are on a business trip outside the U.S.

Why file an extension at all?
Without a valid extension, a late-filed return is subject to a late-filing penalty on any unpaid balance. Late filing penalties are generally abated for:

• Death or serious illness of a taxpayer or family member.
• Unavoidable absence on the filing date.
• Destruction of a residence or business records.

Even if your late filing is not due to one of the circumstances listed above, you can still ask the IRS to abate the penalty. They might just say “yes.”

And, if you know you’re due a refund, but have run out of time to complete your return, you may still want to file for an extension to preserve certain elections.

Paying your taxes

• Whether you file your return or request an extension, you may pay all or part of a balance due by credit card. The credit card payment options are listed on Form 4868 or on the IRS website at irs.gov. Please note that these services charge a nondeductible convenience fee.
• You can file your return and request an installment agreement by filing Form 9465. A user fee applies. A reduced user fee applies if you choose to have your payment directly debited from your bank account or if your income is below specified amounts.
• If you can pay your tax in full within 120 days of filing, you can request a 120-day payment extension by calling the IRS at 1-800-829-1040.
• You may qualify for an extension of time to pay due to hardship. To qualify for an extension of time to pay, you must be able to establish to the satisfaction of the IRS that your assets, liabilities, income, and expenses are such that immediate payment would cause “severe loss and undue hardship.” To request a payment extension, file Form 1127, Application for Extension of Time for Payment of Tax.
• Special rules apply to payment extension requests if you have filed bankruptcy or the IRS has accepted an offer in compromise.

This Tax Fact is brought to you by The Tax Institute at H&R Block.

To view other helpful tax information or listen to our Tax Fact podcasts, visit www.digits.hrblock.com

As always . . . everyone’s tax situation is different, so be sure to consult a tax professional or financial advisor before making important financial decisions.

This Tax Fact is for educational purposes only and is not intended to be a substitute for seeking personalized, professional advice, nor is it intended to be used to avoid IRS penalties.