Do You Really Need to File Tax Extension?

by  posted on:Jun 4, 2018 ,updated on:Jul 14, 2021 | views:7046 //Code for only logged in users

 

If your income exceeds a certain level, you are required to file a federal return. If you are not required to file a tax return, you don’t have to file a tax return. Even you are not required for a year, it is a good way to file a tax return to order to protect yourself against future audits of past returns. The three-year statute of limitations on IRS audits doesn’t start until you file your tax return. If you don’t file, the clock doesn’t start running. Weather you need to file an extension dependent if you owe any taxes and have tax penalties if not to do that.

Due dates to pay taxes and to file tax return

Citizens/residents in the US Citizens/residents working and living abroad or military service outside of the US nonresident aliens who have wage income subject toU.S. income tax withholding Nonresident aliens who did not receive any employee wages subject to U.S. income tax withholding
The due date to pay and file your return is April 15. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. You can request an automatic 6-month extension until October 15th by filing form 4868 by April 15th. An extension of time to file a tax return does not extend the time for payment of the tax due.

 

 If you are a U.S. citizen or resident alien residing overseas, or are in the military on duty outside the U.S., on the regular due date of your return, you are allowed an automatic 2-month extension to file your return by June 15 without filing form 4868.
You must pay any taxes due by the regular tax due date (April 15th) even if you can file your return by June 15.
You can file Form 4868 by June 15th to request an automatic 4-month extension until October 15th. An extension of time to file a tax return does not extend the time for payment of the tax due.		 If you were an employee and received wages subject to U.S. income tax withholding, you must file Form 1040NR and pay your taxes by April 15th.You can file Form 4868 by April 15th to request an automatic 6-month extension until October 15th. An extension of time to file a tax return does not extend the time for payment of the tax due.

 

 If you did not receive wages as an employee subject to U.S. income tax withholding, you must file Form 1040NR and pay tax due by June 15th.If you are not able to file form 1040NR by June 15, you can file form 4868 to extend the filing deadline by 6 months, until December 15. However, you must pay your tax due on or before June 15. An extension of time to file a tax return does not extend the time for payment of the tax due.

Tax rules of penalty for failure to file and failure to pay

  1. An extension on your time to file is not an extension on the time you have to pay what you owe. Even you get a filing extension, you have to pay your tax bill by the due date.
  2. Interest charge compounded daily starts accumulating on unpaid taxes one day after the due date until the bill is fully paid off.
  3. If you owe federal taxes and file late, you are subject to the failure-to-file penalty for late filing. The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late.
  4. If you owe federal taxes and pay late, you are subject to the failure-to-pay penalty for late paying. The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due.
  5. If you file your extension and pay at least 90% of your taxes owed along with it, you won’t pay a penalty, but interest applies regardless.
  6. For any month(s) in which both late-pay and late-filing penalty apply, the 0.5% late-payment penalty is weaved. The combined penalty for failure to pay and failure to file is 5% of unpaid taxes for any month in which you owe both penalties.
  7. If you are more than 60 days late filing your return, your minimum late-filing penalty is the smaller of $205 or 100 percent of your outstanding taxes.
  8. If you don’t file or pay for five months, the failure-to-file penalty will max out at 25 percent of your unpaid taxes. But the 0.5 percent failure-to-pay penalty will continue to accrue, up to another 25 percent of what you owe, until the tax is paid.

Rules of thumb for Filing Extension

  1. If you don’t owe any taxes and you are not be able to file on time if you are required to file a tax return, you can always request an extension by filing form 4868, but there is no penalty if you don’t file an extension.
  2. If you owe taxes and you are not be able to file on time, you should file your extension with your tax payment by the due date to void penalties.
  3. Since the failure-to-file penalty is 10 times greater than the failure-to-pay penalty, it is so important that even if you can’t afford to pay your tax bill to the IRS, you should still file your return, or an extension by the due date
  4. If you have a refund from the IRS, there is no penalty for failure to file your tax return by the deadline, even if you do not request for an extension. Filing an extension will not extend your ability to receive a refund. The three year limitation begins with the original due date of the return to file for a tax refund.