Tax Extension

Tax Extension

It’s nearly Tax Day. If you’re like me, you’re not ready to pop your return in the post just yet. That’s right: like more than 10 million other taxpayers, I file for an automatic extension virtually every year.

Don’t get all judge-y. There’s no need. There are lots of legitimate reasons why taxpayers need more time to file. One of the most common reasons is a situation like mine where income does not come from a mere W-2. In addition to having self-employment income, I own a business; it’s a pass through entity, so I can’t start my individual return until I receive the information from the business. Also, I have investments in Oil & Gas partnerships that do not issue their K-1s till the summertime, typically. Not to mention that, I’m a bit busy that time of year.

But there are other reasons: you could be a beneficiary of a trust or estate or a shareholder or partner in a pass through entity and just now getting your Schedule K-1. You might not have received your forms on time. You might still be waiting for a 1099-R. You might be funding an IRA (you have until April 15th) and need to include that information on your form 1040. There are lots of reasons. You don’t need to tell anyone why you’re filing for extension – even the IRS. And it doesn’t (contrary to popular belief) increase your risk of audit or examination.

The regular “timely filing” rules apply – so be sure and get your extension postmarked by the end of the day on April 15.

Filing for a tax extension gives you a six-month extension of the original time to file for 1040 filers. For the 2016 tax year, this means that, with an extension, you’ll have until Monday, October 16, 2017, to file a return. Also, if you timely filed for your tax extension , you will not be subject to the late-filing penalty, which is 5% of your unpaid balance per month, which caps out at 25% total if you are 5 or more months late. This means that even if you know you owe, the late filing penalty would not apply if you at least file a timely extension, even if no payment is made with the extension. Yes, late payment penalties, underpayment penalties, and interest would still apply if a balance were due, but those other penalties and interest combined are minuscule in comparison to the failure-to-file penalty. Further, the current IRS interest rate runs at only 4% on an annual basis.

For the record, here are the regular and extended tax deadlines for all income taxpayer types:

Form 1040 (Individual Income Tax Return), original due date is Apr 15th, extended due date is Oct 15th

Form 1041 (Estate and Trust Income Tax Return), original due date is Apr 15th, extended due date is Sept 30th

Form 709 (Gift Tax and Generation-Skipping Tax Return), original due date is Apr 15th, extended due date is Oct 15th

Form 1065 (Partnership Tax Return), original due date is March 15th, extended due date is Sept 15th

Form 1120 (Corporation Income Tax Return), original due date is 3 1/2 months after year end, extended due date is 6 months after the original deadline, except in the case in which the corporation has a fiscal year end of June 30th in which case the original due date is September 15th and can be extended 6 months after the original deadline 

Form 1120S (S Corporation Tax Return), the original due date is Mar 15th, extended due date is Sept 15th