We will be looking at when and how to get more time to prepare personal and business taxes.
WHAT IS IRS FORM 4868?
IRS Form 4868 is an IRS extension form that you will have to file with the IRS when you are required to file a federal tax return and you want more time to do it, when you realize that it is almost the filing deadline and you are still not ready to file your federal tax return. Even the Internal Revenue Service understands that this is happening and offers an automatic extension of the filing time.
Technically, Form 4868 is used to automatically extend the time for filing a personal income tax return.
You can use it if you file Schedule C with a personal return as the sole owner of the company or as a one-member limited liability company, because the profits from your company are included in your personal income. You may have to submit a separate extension for your business. Your business may need to submit Form 7004 instead, and other rules may apply.
WHAT DOES FORM 4868 DO?
Normally, filing Form 4868 gives you a six-month extension, usually until October 15th. But the April tax deadline can be rolled back a few days from the 15th day if it falls on a weekend or holiday, so the extension would be six months from the actual April date on which the tax returns were due in that year. But for this current year 2020, the original deadline was moved from April 15 to July 15 because of the ongoing global pandemic. This means taxpayers have until July 15 to file the IRS form 4868 to receive an extension to file for their individual income tax return.
However, the six month extension doesn’t apply to year 2020 as the deadline for those who filed for extension is still October 15th.
Form 4868 must be submitted in July or before the due date in July, unless you are outside the country at that time – you live and your place of business is outside the United States or Puerto Rico.
In this case, you must apply for an extension by September 15th.
Taxpayers may want to file an extension if they have not gotten all the necessary information required to prepare their personal income tax returns. Probably they have not received a particular schedule from a trust or the situation of COVID 19 is making it difficult for them to prepare their taxes. There has been a restriction of movement in the United States for some time now and even though some platforms are being reopened and people can move about more freely now, they still need time to gather all they need in order to organize their personal tax returns without any complications.
For those who are self-employed and seeking a retirement plan, one benefit of filing an extension is that it gives them more time to set up and fund a Simplified Employee Pension (SEP) retirement plan. If you obtain an extension, you avoid late filing penalties as long as you file for your tax returns by the extended due dates. If you don’t, the late filing penalty is 5% of the amount due for each month your return is late. When your return is more than 2 months late, you attract a penalty of about $330.
Also keep in mind that filing for an extension doesn’t mean you can pay taxes after the initial deadline. Taxpayers are to pay their taxes on or before July 15th if not they attract interests and penalties. The IRS have helped buy more time to pay taxes as they have extended the 2019 tax payments by 2 months so taxpayers should have no excuse not to pay their taxes.
WHO CAN FILE FORM 4868?
Taxpayers can file the form when they need an extension for a variety of returns using the form 1040. There are 6 schedules on the form 1040, you just have to find the category you belong to and fill.
HOW TO FILE FORM 4868
According to IRS standards, Form 4868 is a short form that takes only half a page to fill up. You don’t need to state a reason why you want an extension and the form doesn’t require you to sign. The form only requests the following;
Your name and the name of your spouse if you are married and file a return together
Your address and social security number
An estimate of your total tax liability for the year
The sum of all the payments you’ve already made in connection with your tax liability
The balance you still owe
The amount you pay with your extension request
The easiest way is to submit the form online in an IRS electronic filing file. The IRS will send you an electronic acknowledgment of receipt.
CASES WHERE YOU MAY OWE TAXES
Obtaining a filing extension does not give you more time to pay your taxes. Due to the COVID-19 crisis, payments on taxes were extended two months. Interest and penalties on unpaid taxes begin to emanate after the extended two months.
You can pay all or part of your estimated tax balance by direct debit from your checking or savings account free of charge through access to IRS Direct Pay online. You can also pay by debit or credit card on the IRS website or by phone for AUSTa small service fee. To take care of the old business, print out Form 4868, fill it out, and send it to the Internal Revenue Service Center for your geographic area. Addresses are provided with a 4868 form.
Form 4868 does not give you more time to pay what you owe – this balance was still due by April and penalties and interest will be credited to any remaining balance you have after that date. This is still generally less expensive than incomplete prolongation, as late administration can be up to 10 times higher. So go ahead and file Form 4868, request an automatic renewal, and then pay the IRS any balance you owe as soon as possible.
