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Extensions: life after April 15th

Why bother? What's the big deal if I do my tax return a little later?

1. you will have to pay interest
2. you will have to pay penalties, on top of interest
3. you will become a criminal. Beleive it or not - but not filing a tax return is a crime (as in "jail")

What is an "extension"?

It's one of the very few cases when the IRS lets us (temporarily) off the hook. Anybody who did not file tax return by April 15th could legally request additional six months to do so and thus avoid late filing penalties. The official name for the deal is an "automatic 6-month extension of time to file." Applying is unusually easy: just fill out and mail an amazingly simple Form 4868 No questions asked, no need to provide a reason, not even a signature. The catch is that you still have to pay the tax by April 15 - it's only the paperwork that could be delayed until October 15!

How is it possible to pay the tax without knowing how much?

Since the exact amount of tax is unknown until the actual tax return is completed, you are expected to estimate. If you overestimated and overpaid, you'll get a refund. Otherwise, you'll have to pay the difference plus interest.

What IRS forms do I need?

• For personal tax returns, you need Form 4868
• Please remember that you may need to file a separate extension with your state tax department. Texas does not have a state income tax - so no extra headache for my fellow Texans.
• Family needs only one form that covers both spouses and kids. However, if you and your spouse are filing (or considering filing) separate returns - then you need separate extensions as well.
• Using DBA names ("Doing Business As") does not require any additional extensions.
• LLCs (Limited Liability Companies) owned by one person or by husband and wife usually do not need additional extensions. Such LLCs are considered "disregarded entities" and reported as part of your personal tax return.
• LLCs owned by multiple partners (except husband-wife LLCs) are considered partnerships by the IRS. They require Form 7004 for an extension.
• If you organized your business other than DBA or LLC (corporations, partnerships, trusts) - ask an accountant.

Can I file an extension online?

Yes! And you do not even have to pay for it!
You can start at the IRS website, however I recommend you use TurboTax website,

What if I have absolutely no idea about my tax numbers?

File an extension anyway! If you had jobs, look for forms W-2 sent to you by your employer. Nowadays, many of these W-2 forms are accessible online, at your company's website. Look at the number in Box 2, "Federal income tax withheld." If you have multiple W-2s (but not multiple copies of the same W-2!) - add up all numbers from Boxes 2 on those W-2s. Put this number in boxes 4 and 5 on the extension form 4868. Put zero in boxes 6 and 7.

If you cannot find W-2s or have none - put zeroes everywhere on the extension form, however this is not really the right way to go about it. Try to find your W-2s.

What if I did not apply for the extension in April?

Then it's too late, sorry. You're considered a late filer. Expect penalties and interest. It's in your best interest (pun not intended) to prepare and file your return as soon as possible, even if you can't pay. You're not eligible for a second extension either.

How do I indicate that my return is an "extension" return?

There is no difference between April and October returns: same forms, rules, and requirements. You can download all this stuff directly from the IRS Web site. Just remember to include the amounts (if any) that you already paid in April, when you filed the extension request. Provided that you timely filed the extension form 4868, you're not subject to late filing penalty. Other penalties and interest may still apply though.

Is it true that returns filed "on extension" are not audited?

No. If you know how returns are selected for an audit, you realize that no return can be "audit-proof." However, there is a popular theory that the IRS fills its audit quotas by the time the extension returns are filed, and therefore risk of an audit is reduced to minimum. Nobody but few insiders know if it's indeed true. I wouldn't count on that. And, if you remember The Three Little Pigs, don't go on a cheating spree to tease the Big Bad IRS Wolf.