As the April 15 filing deadline draws near, some taxpayers may be tempted to request an automatic extension of time to file their personal federal income tax returns. The University of Alabama’s Dr. Shane Stinson offers some key points to consider before requesting such an extension.
- Ways to request an extension: Individuals who are unable to file a federal income tax return by the original due date may request an automatic six-month extension to file by submitting Form 4868 to the IRS or by making a full or partial payment of estimated income tax due through an approved electronic payment processor. Regardless of the method used, extension requests must be made by the original due date of the return in order for the taxpayer to avoid late filing penalties. For more information on federal income tax return extensions, see IRS Topic 304 (http://www.irs.gov/taxtopics/tc304.html).
- No extension for the payment of tax: Automatic extensions granted by the IRS only apply to the date by which a complete and accurate federal income tax return must be filed. No such extension is granted for the actual payment of income tax due, and any underpayment of income tax due by the original filing deadline (without regard to extensions) is subject to interest charges and possible late payment penalties.Thus, the IRS recommends that income tax liabilities be paid in full and as near as possible to the original filing deadline of the return. This may require conservative estimates and possible overpayment of a taxpayer’s final federal income tax liability if sufficient information is not available to complete a return before the original filing deadline. For more information on tax payment options, see IRS Topic 202 (http://www.irs.gov/taxtopics/tc202.html).
- Federal extension request does not apply to state returns: Requesting an automatic filing extension from the IRS does not necessarily provide an extension to file income tax returns at the state level.Various states may require a separate extension request. The state of Alabama grants an automatic six-month extension without the filing of an extension request, but may still impose interest and penalties on tax liabilities that are not paid on or before April 15. (http://revenue.alabama.gov/incometax/itfaq01.cfm).
- Delayed refund of overpaid taxes: A federal income tax return must be filed and processed by the IRS before any overpayment is refunded to the taxpayer.Thus, by requesting an extension and filing a federal income tax return after the traditional April 15 deadline, a taxpayer may further delay receipt of a refund. For more information on refunds, see IRS Topic 152 (http://www.irs.gov/taxtopics/tc152.html).
- Why request an extension?: While extension requests do not delay the actual payment of federal income taxes, there are many circumstances under which extensions may serve as a valuable tool to taxpayers. For instance, if a taxpayer faces uncertainty and/or difficulty in collecting information necessary to complete a federal income tax return by its original due date, a timely filed extension can help the taxpayer avoid separate penalties for the late filing of a return. Furthermore, the use of an extension may prevent a taxpayer from filing a timely return that is incomplete and/or contains errors, possibly avoiding the subsequent need to file an amended return. For more information on amended returns, see IRS Topic 308 (http://www.irs.gov/taxtopics/tc308.html).
Stinson is an assistant professor of accounting in UA’s Culverhouse School of Accountancy.
