Income Tax Corner: What’s a Personal Income Tax Extension?
Mar 29, 2018 06:00AM ● By Pamela Johnson
One of the most misunderstood parts of the Internal Revenue Code (IRC) is that of filing for an extension of your personal income tax return. The code is very clear, but the misunderstandings, unfortunately, are on the part of the public. Hopefully this will clear up some items and, if you are planning to file for an extension, you will be able to avoid any interest and penalties.
First of all, the form most people would file is number 4868, which is an automatic 6-month extension to file. A different form may apply if you are out of the country and the extension time granted is 4 months. This means that since the current 2017 filing season deadline for most of us is April 17 of this year, this form will extend that deadline to October 15. One big item to keep in mind is that you must file for the extension with the IRS on or before April 17. If you do not, the extension will not be granted; it is void and would not be considered valid.
How do you file for the extension? There are two choices: You can efile it directly to the IRS or mail in the paper form. The paper form can get tricky in three ways. First the address system you would use is based upon what state you live in. Secondly, as noted above, it must be postmarked on or before April 17. Third, there are two addresses for it, based on whether or not you are sending in any money. It’s sort of like a sifting process for where it is sent.
The IRS does not ask why you are filing for the extension. The fact that it’s filed correctly and on time is good enough for them. On the other hand, if you plan to send a tax return to the IRS in which you want them to figure the tax, you would not be eligible to file an extension. This also goes for anyone court-ordered to file by the due date. An extension is not valid in these situations.
The extension to file is just that. It is not an extension to pay. You must pay any estimated money you’ll owe with the form. One may ponder: "Why file for an extension if I already have a good idea as to whether I owe, how much I owe or if I may even be eligible for a refund?" The answer is that the extension allows you up to 6 months to prepare and finalize your records to substantiate your income, expenses, credits, deductions, adjustments etc. It’s a great way to really figure all your entries on the tax return down to the penny.
Along these same lines, if you file for an extension, you do so on time, and you owe tax but do not pay it at this time, the extension can be considered invalid. Considerable penalties and interest can be assessed along with the tax. In all cases, you are infinitely better off operating inside the guidelines of the IRC.
A few final thoughts: when filing for the extension, you are allowed to use the whole-dollar rule. This is a very common practice in the industry. Paying with an extension request mailed to the IRS would mean you’d be enclosing a check with the Form 4868 (never send cash). Enclosing is the key word--no staples. The check would be made payable to the “United States Treasury.” Maybe this final thought would apply to you, maybe not, but the rule of how much can be paid is based on the $100,000,000.00 standard. If you owe $100,000,000 or less on the extension, you can pay it with one check. If you owe more than that, you’d have to pay it in multiple checks. The IRS won’t accept checks in excess of $100,000,000.
I hope this article has been of assistance to you.
About the Author: Jerome Ryan is the owner of the Oscar J. Ryan Agency and Ryan Tax Consultants, located at 132 Main Street, Blackstone. He has been preparing tax returns for 38 years and has been engaged in the insurance business almost 40 years. He is licensed by the United States Department of the Treasury Internal Revenue Service as an Enrolled Agent, which is their highest level of credential. For more information, contact him at 508-883-8411.
First of all, the form most people would file is number 4868, which is an automatic 6-month extension to file. A different form may apply if you are out of the country and the extension time granted is 4 months. This means that since the current 2017 filing season deadline for most of us is April 17 of this year, this form will extend that deadline to October 15. One big item to keep in mind is that you must file for the extension with the IRS on or before April 17. If you do not, the extension will not be granted; it is void and would not be considered valid.
How do you file for the extension? There are two choices: You can efile it directly to the IRS or mail in the paper form. The paper form can get tricky in three ways. First the address system you would use is based upon what state you live in. Secondly, as noted above, it must be postmarked on or before April 17. Third, there are two addresses for it, based on whether or not you are sending in any money. It’s sort of like a sifting process for where it is sent.
The IRS does not ask why you are filing for the extension. The fact that it’s filed correctly and on time is good enough for them. On the other hand, if you plan to send a tax return to the IRS in which you want them to figure the tax, you would not be eligible to file an extension. This also goes for anyone court-ordered to file by the due date. An extension is not valid in these situations.
The extension to file is just that. It is not an extension to pay. You must pay any estimated money you’ll owe with the form. One may ponder: "Why file for an extension if I already have a good idea as to whether I owe, how much I owe or if I may even be eligible for a refund?" The answer is that the extension allows you up to 6 months to prepare and finalize your records to substantiate your income, expenses, credits, deductions, adjustments etc. It’s a great way to really figure all your entries on the tax return down to the penny.
Along these same lines, if you file for an extension, you do so on time, and you owe tax but do not pay it at this time, the extension can be considered invalid. Considerable penalties and interest can be assessed along with the tax. In all cases, you are infinitely better off operating inside the guidelines of the IRC.
A few final thoughts: when filing for the extension, you are allowed to use the whole-dollar rule. This is a very common practice in the industry. Paying with an extension request mailed to the IRS would mean you’d be enclosing a check with the Form 4868 (never send cash). Enclosing is the key word--no staples. The check would be made payable to the “United States Treasury.” Maybe this final thought would apply to you, maybe not, but the rule of how much can be paid is based on the $100,000,000.00 standard. If you owe $100,000,000 or less on the extension, you can pay it with one check. If you owe more than that, you’d have to pay it in multiple checks. The IRS won’t accept checks in excess of $100,000,000.
I hope this article has been of assistance to you.
About the Author: Jerome Ryan is the owner of the Oscar J. Ryan Agency and Ryan Tax Consultants, located at 132 Main Street, Blackstone. He has been preparing tax returns for 38 years and has been engaged in the insurance business almost 40 years. He is licensed by the United States Department of the Treasury Internal Revenue Service as an Enrolled Agent, which is their highest level of credential. For more information, contact him at 508-883-8411.
