Should You Apply for an Extension of Time to File Your Taxes?
April seems to arrive more quickly every year and the IRS knows that we’re not all going to have our ducks in a row in time to file properly. If you’re rushing to meet this year’s April 15th tax filing deadline, consider applying for an extension to give yourself some breathing room. The IRS offers a six-month due date extension that, unlike with your boss, you don’t need a good excuse to get. Some acceptable reasons to apply for an extension include:
- You’re still waiting on some of your tax documents to arrive.
- You’ve been very busy at work and haven’t been able to get your documents organized.
- Your dog ate your tax documents.
The IRS gives you three options that make it easy to apply for an extension:
- Make an estimated payment of the amount you owe on the IRS Direct Pay website and indicate that the payment is for an extension.
- E-file Form 4868.
- Mail the IRS a paper copy of Form 4868.
An Extension Does Not Provide Additional Time to Pay
While an extension provides additional time to file your tax return, it does not change the due date of any taxes you owe. If you expect to owe taxes this year, you should make an estimated payment of your liability to avoid unnecessary penalties and interest. Here’s how the IRS phrases it:
Although you aren’t required to make a payment of the tax you estimate as due, Form 4868 doesn’t extend the time to pay taxes. If you don’t pay the amount due by the regular due date, you’ll owe interest. You may also be charged penalties.
I Expect to Receive a Refund, Should I Make an Extension Payment?
If you’re confident that you’ll receive a refund, there is no reason to make a payment with your extension. If you’re on the fence, making a payment could save you from incurring interest and penalties. Here’s the IRS again:
The late payment penalty is usually ½ of 1% of any tax not paid… it is charged for each month or part of a month the tax is unpaid.
Don’t worry about paying too much. If you make a payment above what you owe the excess will be refunded or can be applied to the following year’s liability.
What is the Automatic Two-Month Extension for Expats?
U.S. citizens and resident aliens that are out of the country on the regular due date of their return are allowed two extra months to file. Out of the country doesn’t mean that you can plan a quick trip to Mexico around April 15th each year and receive an extension. The IRS states you’re out of the country if:
- You live outside the United States and Puerto Rico and your main place of work is outside the United States and Puerto Rico, or
- You’re in military or naval service outside the United States and Puerto Rico.
There are no additional forms to file up front to receive this automatic two-month extension, but you must attach a statement to your return explaining which of the two definitions of “out of the country” listed above applies to you. Just like with the six-month extension using Form 4868, this two-month extension does not change the due date of any taxes you owe.
I’m Abroad, But My Spouse is Not. Do We Qualify for the Automatic Two-Month Extension?
Publication 54 tells us: If you file a joint return, either you or your spouse can qualify for the automatic extension. If you and your spouse file separate returns (married filing separately), the automatic extension applies only to the spouse who qualifies for it.
I Qualified For the Two-Month Extension, But Still Need More Time
If June 15th is quickly approaching and your ducks are still swimming in all directions, you can file Form 4868 by your new June 15th deadline to obtain an additional four-month extension (to October 15th). The process is the same for expats and domestic taxpayers; you can file the form on the IRS website, through the mail (not recommended if you’re overseas), through tax preparation software, or through a professional preparer (oh, hey are we working together yet?).
Applying for an Extension to Meet the Physical Presence Test or Bona Fide Residence Test
If you need an extension to meet either the Physical Presence test or the Bona Fide Residence test to qualify for the Foreign Earned Income Exclusion, the IRS has a different process for you, which uses Form 2350. To qualify for an extension using Form 2350, all of the following must apply:
- You are a U.S. citizen or resident alien.
- You expect to meet either the Bona Fide Residence test or the Physical Presence test, but not until after your tax return is due.
- Your tax home is in a foreign country (or countries) throughout your period of bona fide residence or physical presence, whichever applies.
Unlike the other types of extensions discussed above, an extension using Form 2350 is not automatic. The form includes a return label which the IRS will complete and return to you indicating whether your extension has been approved or denied. For this reason, it’s important to file Form 2350 as soon as possible, leaving sufficient time to file your return on time should your application be denied.
Another difference between a Form 2350 extension and the others is length. If approved, Form 2350 grants you an extension to 30 days after the date in which you expect to qualify for the Physical Presence test or Bona Fide Residence test.
Should I File Form 4826 or Form 2350?
If you are waiting to file because you need more time to qualify for the Physical Presence test or Bona Fide Residence test, file Form 2350. All other taxpayers should file an extension with Form 4826.
Is There a Separate FBAR Form 114 Extension?
If you have foreign financial accounts that require disclosure on FBAR Form 114 and would like an extension of time to file, no specific extension request is required. FINCEN, the agency that oversees FBAR filing, stated that taxpayers failing to meet the FBAR annual due date of April 15th are granted an automatic extension to October 15th.
Basically, if you don’t file your FBAR by the April due date, don’t worry about it. FINCEN is giving you until October 15th. No questions. No paperwork. It’s 100% automatic.
Do I Need to File a Separate State Extension?
Maybe. Your state may require their own extension, may accept the Federal one, or may not require you to pay income taxes. The IRS has attempted to help taxpayers by gathering (outdated) state extension information in one place. Take a look at the IRS website, but be sure to verify everything with your state’s tax website.
Do You Have Questions About Filing an Extension? Leave them in the Comments Below!
Resources and Tax Forms:
Tax Guide for U.S. Citizens and Resident Aliens Abroad
IRS NewsRoom: Eight Facts on Late Filing and Late Payment Penalties
IRS Form 4868: Application for Automatic Extension of Time to File
IRS Form 2350: Application for Extension of Time to File (Physical Presence test or Bona Fide Residence)
