Everything You Need To Know About Tax Extensions

Provided that the debts were properly paid off, filling for the IRS tax extension might be easier than what it seems.

There are a lot of reasons why we need tax extensions. Some of these are the following:

• The taxpayer needs more time in gathering the tax documents and forms that are necessary for your filling.
• The taxpayer doesn’t have the capabilities to complete your taxes due to sickness or injury
• The taxpayer is currently living in another country or out of the country for work purposes or leisure and will not be back till April 15.

If in case any of the above mentions fit in your current situation, then filling for a tax extension is the move you need to do in order to have ample time in completing your taxes comprehensively and with accuracy.

Aside from having extra time for the filing, tax extensions will allow taxpayers to get away from acquiring penalties such as late-filing and late-payment. Note that taxpayers still need to pay their tax obligations to the government even after filing for an extension. In accordance with federal law, it is still necessary to forward the projected debt amount needed to IRS no later than April 15, 2020.

If in case the taxpayers present cash-flow standing will not be sufficient to pay for his/her obligations to IRS, it is advisable for them to immediately contact the agency and arrange a payment plan to fully paid whatever was owed to the U.S government.

When is the Tax Extension Deadline

October 15, 2020, is the tax extension deadline for the 2019 taxation year. If you are still halfway in preparing your tax returns and want extra time to file, the best way to buy out time is having the tax extension.

How to File for an IRS Tax Extension

The process of filing an IRS tax extension is direct through the involvement of 2 principal options.

    •    Use the IRS Form 4868

The form is also known as the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You just need to print out the form, fill it up then send it to IRS. See to it that the IRS address you indicate is pertinent to your state.

Bear in mind that it is possible to file the Form 4868 via mail (just make a hard copy of your finalized form then mail to IRS) or e-file it with the help of tax services firms such as Turbo Tax, H&R Block (HRB), or local tax accounting service that takes care of your taxes.

    •    Go with a Pro

If in case you currently using a tax service specialist, you can ask them to file the extension on your behalf.

Let us make the Turbo Tax and H&R Block as an example. The latter tax service providers offer an option for the electronic filing of the federal tax extension. The tax service specialist will take care of all required paper works of the tax extension request, they will also notify their clients on the status of the request and if it was approved by the IRS.

In some instances, the only available option in filing the extension is through the mail but it will vary depending on the state residency of the taxpayer. If you have a doubt, it is better to ask your tax specialist for the available method of filing your tax extension request. To get additional information go to the nearest state's tax office or office of tax revenues.

Taxpayers can access the list of all the tax offices in 50 U.S states at the American Institute of CPAs (AICPA). 

If the tax extension will be approved, the federal government will give taxpayers an extra time not later than October 15, 2020, to file for their taxes. Expected earnings from tax refunds will be released the moment the taxes were filed and processed by the IRS.

• How to File an Extension outside the US
• Residents outside the US can apply for the tax extension using the IRS Form 2350 instead of Form 4868.
• This form is also known as Application for Extension of Time to File U.S. Income Tax Return.

U.S citizens and resident aliens who are residing outside the country can use the form for their tax extension request and the Form 2555 or 2555-EZ for tax filing. In this case, taxpayers abroad may require more time to pass the U.S. bona fide resident test or the IRS' physical presence test to fulfil the criterion for the foreign earned income exclusion, or the foreign housing exclusion mandates.

Why might the IRS Reject a Tax extension?

Taxpayer’s request for the tax extension is normally granted by the IRS, but there are few instances that they will reject it. Take note on the following cases that would affect the approval of the tax extension request:

• The taxpayers projected payment is too far. IRS will reject the request if the will see that projections were wrong or else questionable.
• Taxpayers undervalue tax payment level will not just reject the tax extension request, but taxpayers will also incur additional interest for the undervalued tax payments. The calculation for the interest of unpaid tax payable will start on April 15, 2019 - which is the deadline for the IRS payments.
• In accordance with IRS regulations, if the taxpayer’s payment made to the federal government reaches only 90% of the total payable amount, he/she will be subjected to a .05% tax penalty for the underpaid value per month or the portion of the month wherein the return was delayed.

If in case that the IRS turns down the request for a tax extension, Taxpayers can still acquire the IRS approval by filing a new claim and possibly build a stronger case.

Filing your tax extensions at the earliest possible date is the key, preferably do it well ahead of April 15. By doing so, if your extension request will be rejected you will still have time to apply for a new one before the due date.

What happens if you miss the tax extension deadline?

In the event that the taxpayer fails to file the tax return on the deadline which is October 15, he/she will have to deal with a tidy sum of constraints. 

Increase in interest payments. The interest in unpaid taxes will continuously sum up until the obligations to the federal government were settled.

Increase on penalty for late payment. Given the fact that the IRS is charging a 5% penalty to unpaid outstanding taxes on April 15 due date, the taxpayer will incur penalties up to 25% if the filing of the tax return was not yet done by October 15 due to date.

Acquiring extra tax penalties. In addition to the above-mentioned tax penalties payables, the IRS will also charge an extra 5% late payment tax penalty for all outstanding taxes unpaid after October 15. Take note that the IRS penalty limit can rise up to 25% as per the IRS ruling.