Here is a look at all that you need to know about filing for a tax extension, along with any special filing circumstances that you may qualify for:

What is a Tax Extension?

A tax extension buys you extra time to prepare and file your tax return. When you file for an extension, it is typical for the the IRS to automatically grant you an additional six months to file your return. If you file for a tax extension for the 2011 tax year, your new due date will be October 15, 2012.

It is critical to understand that while you can get an extension on preparing and filing your tax return, you cannot get an extension for paying your tax bill. If you think that you are going to owe the IRS money, you will need to estimate the amount due and send it in with your application for an extension. If you fail to pay your tax bill by April 17^th then you will be subject to penalties and fees.

How Do I Go About Filing for an Extension?

Filing for an extension is fairly simple. You will need to fill out IRS Form 4868 in order to qualify. The form asks for your name, address, social security number for you and your spouse, if applicable and an estimate on your tax liability.

You can either e-file for your extension or you can print out the form from the IRS website and mail it in. If you do owe tax dollars, you can make your payment electronically with an e-file application or if you are mailing in your application you can include with it a check covering your payment due.

Extensions for U.S. Taxpayers Living Outside of the Country

If you are currently a US citizen or resident alien and living outside the country, you may qualify for additional extensions, including an automatic two month extension that you do not need to apply for. You may also qualify for the traditional six month extension and an extension on paying your tax bill if you owe the IRS money. If you do file for an extension to pay, it is important to note that you will have to pay interest on the amount due from the original due date.

Extensions for Military Members

If you are an active member of the military and living outside the US, you automatically qualify for a two month filing extension and no action is needed on your part to receive it. Additionally, if you are in the armed services and are currently or have recently been located in a combat zone, you are also eligible for special tax filing extensions as follows:

• You do not need to file your taxes for the time period you are stationed in a combat zone. Once your tour is up, you will have the number of days served in the combat zone prior to the tax deadline plus an additional 180 days to prepare and file your return. For example, if you were stationed in a combat zone on April 1, 2012, when your combat tour is over you will have 197 days to file and pay your 2011 taxes.
• If you are injured while in a combat zone and are hospitalized due to such injuries, you do not need to file any tax returns until your hospitalization has ended with the maximum allowed time being 5 years plus 180 days.

All military extensions that are granted for combat zone employments and hospitalizations also allow for an extension on paying your tax bill with no interest or penalties due.

Related posts:

1. 2010 Tax Filing Extension: Instructions & Forms to File IRS Extension
2. How to File for a 2009 Tax Filing Extension
3. What If I Didn’t File My Taxes or Request an Extension to File?

The most common reason for not filing tax returns on time is when a tax bill is owed.  Unfortunately by not filing, the unpaid balance of your taxes will be charged with the failure to file penalty which is 5% a month. If you do not owe the IRS money and you did not file, the IRS will not impose penalties as long as they agree that no taxes are owed. If you are owed a refund and do not file, the IRS will not send you the refund until your taxes are filed. The IRS does not look favorably on individuals who fail to file their income tax return by the deadline, however they will be more willing to work with individuals who take the necessary steps to fix the problem versus those who pretend it doesn’t exist.  If you haven’t filed your return on time, the following information can help you back on track and avoid additional fees and penalties.

• File your tax return as soon as possible-  There is no way around it, you must file your tax return even if you are filing it late.  After the deadline passes you no longer have the option to request an extension, therefore the sooner you file your return the better.
• Determine how long it will take to pay your tax bill-  Look at your current financial situation and figure out how much time is needed to pay your tax bill.  The ideal scenario would be that you have the resources available to pay your bill in full, therefore eliminating the additional fees and penalties that will accrue over time.  If you do not have the resources on hand to pay your tax bill you should determine how long it will take to repay the money owed.  This information will be needed in order to set up an installment agreement or other type of payment plan.
• Contact the IRS to arrange payment-  As long as your tax bill remains unpaid, you will continue to accrue penalties and fees that can significantly increase the amount of money owed.  By working with the IRS to establish a repayment plan, you can begin making payments to reduce your tax bill, thereby reducing the amount of fees and penalties that are applied to the liability.
• Consider a loan-  Depending on the amount of money owed and your ability to secure personal financing, you may want to consider borrowing money to pay off your tax bill.  Before doing so you should carefully review the terms of any new loans to ensure you are selecting the option that will save you money in the long term.

It is not uncommon to feel overwhelmed or intimidated when dealing with the IRS and unresolved tax issues.  If you have failed to file your tax return on time and do not feel up to dealing with the situation on your own, consider hiring a tax professional to help guide you through the process.  Delaying the inevitable will only result in additional stress on your part and a growing tax bill that will have to be addressed at some point in time in the future.  The sooner you face the situation and develop a plan to deal with any taxes owed, the sooner you will be able to resolve the problem and move on with your life.

Related posts:

1. When to File a Late Tax Return or Request a Tax Extension
2. 2010 Tax Filing Extension: Instructions & Forms to File IRS Extension
3. Filing a 2011 Tax Extension: 2012 Deadline Dates & How to File

Due Date For Tax Liabilities Is Not Extended

One of the reasons taxpayers do not file taxes or fail to file on time is when a tax liability is owed.  Some individuals believe if they do not file, they can somehow evade the tax man.  As many well know figures in the past can attest, this is not a scenario which ends well for the taxpayer.  Other filers may not be attempting to avoid paying taxes, but simply do not have the money available by the April 18th deadline.  Understand this, by filing a request for an extension, you are not extending the date in which tax liabilities are owed.  Any tax bill owed to the IRS will be due by midnight on April 18th, regardless of whether or not your tax return is filed or an extension requested.  This is an important factor to consider as some taxpayers mistakenly request an extension to file believing this will stop penalties and interest from being applied to a tax liability.  If this is the only reason you are requesting an extension, you may want to reconsider and focus your attention on how you can pay your tax liability.

How To Request An Extension

Filers who still wish to request an extension can do so easily by filling out Form 4868.  This form “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return” provides detailed information about how you can request an extension as well as instructions for taxpayers who are out of the country at the time of the deadline.  Basically, you can download Form 4868 to your computer, print it, fill it out and mail into the IRS by midnight April 18th, 2011.  If you owe the IRS, you can include a check for full or partial payment at this time as well.  In addition to mailing the request, filers may also request an extension online.  There are several tax preparation software systems which can be used to request an extension.  Depending on which software you use, you may be charged a fee to file your request online.  Carefully read the directions to determine what if any charges would be applied to file online before submitting the request.  Regardless of what method you choose to request the extension, make sure the extension is filed or mailed before the deadline to avoid getting hit with a failure to file penalty (if taxes are owed).

Related posts:

1. How to File for a 2009 Tax Filing Extension
2. Filing a 2011 Tax Extension: 2012 Deadline Dates & How to File
3. What If I Didn’t File My Taxes or Request an Extension to File?

There are three ways to request a tax filing extension. You need to fill out IRS Form 4868, Application For Automatic Extension of Time to File U.S. Individual Tax Return. You can file this form electronically or by mail.

Electronically Request a 2009 Tax Filing Extension

Using tax software or IRS e-file services, you can fill out Form 4868 to request additional time to prepare your tax return. You will receive an electronic acknowledgment when you complete and file Form 4868 electronically – be sure to keep the acknowledgment with your records. If you think you will owe taxes when you do file your return, you should estimate the amount due based on the information from Form 4868, and make a payment when filing for the extension. Payments can be made with a check, money order, automatic bank debit, by phone, or with a debit or credit card. There are service and convenience fees charged for various payment methods, so compare your options to find your least expensive option for making the payment. For information about how to e-file, please visit www.irs.gov or a local tax professional.

Request a 2009 Tax Filing Extension by Mail

If you would like to request an extension by mail rather than electronically, you’ll need to print and fill out Form 4868 (http://www.irs.gov/pub/irs-pdf/f4868.pdf ). Once you fill out the form with all the required information, you can mail it to the same place where you will be filing your tax return once it is completed.

Related posts:

1. 2010 Tax Filing Extension: Instructions & Forms to File IRS Extension
2. Filing a 2011 Tax Extension: 2012 Deadline Dates & How to File
3. What If I Didn’t File My Taxes or Request an Extension to File?

1. Pay your taxes on time: The due date for paying individual taxes is April 15th, if you do not pay your taxes by then you will be hit with the failure to pay penalty. The failure to pay penalty is .5% a month and starts being charged on April 16th if taxes are not paid or paid in full. If the taxes remain unpaid the IRS may increase this to 1% a month. The maximum cumulative penalty this can be is 25% of taxes owed.
2. Enter into installment agreement if you can’t pay in full: The IRS will reduce the failure to pay penalty from .5% to .25% if you enter into an installment agreement to pay back the taxes you owe. The IRS rewards those taxpayers that come forward and work with them on their tax problems, which can be seen by them charging lower penalties. It is common for individuals to not be able to pay taxes in full and the IRS has very good mechanisms in place to help these people get back into full compliance with the IRS.
3. File your taxes on time: One of the worst things you can do and rack up huge penalties is not filing your taxes on time. This rule mainly only applies to those individuals that owe taxes. For each month that goes by and you owe taxes and have not filed a tax return, you will be charged 5% for the failure to file tax penalty. This penalty will max out after 5 months and reach a maximum of 25% total penalty. Many people don’t file their taxes because they cannot pay what they owe, this is the worst thing that can be done since the failure to pay penalty is 10 times less than the failure to file penalty.
4. File for an extension if you can’t pay on time: If you can’t file on time you can file for a 6 month extension. One thing to know is that when you file for an extension to file, this does not allow you an extension to pay. You still must pay at least 90% of the taxes you owe by April 15th. If you don’t pay the taxes by April 15th and you filed for an extension, you will be charged with the failure to pay penalty. The failure to pay penalty is significantly less than the failure to file, so even if you can’t pay or file on time this will save you quite a bit of money in penalties.
5. Remove Penalties: If you have already been charged penalties you can possibly have the removed through penalty abatement. If you can show the IRS that you have “reasonable cause” for not filing or paying your taxes, they will likely remove the penalties. The IRS removes about 30% of the penalties it charges each year.

The best thing you can do in order to reduce or prevent tax penalties is to take action to solve your problem as fast as possible. If you have any questions you should either contact the taxpayer advocate (877-777-4778) or contact a tax professional to help you. Tax penalties are unnecessary and knowing the common causes of these penalties can help you avoid them in the future.

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Related posts:

1. Tax Penalties That Can Be Removed, and How
2. Small Business Tax Penalties: What They Are & When They’re Charged
3. Last Minute Tax Tips for Your 2009 Tax Filing

For the estimated 10 million Americans who requested a tax filing extension with the IRS or their State for the typical April 15th filing deadline, realize that this extension was only good for 6 months or until October 15th, 2009. As you probably know, you had to submit an estimated payment with this extension (if you are self-employed or don’t work for a company) because any filing extension is not an extension to pay but an extension to file. Essentially, an extension would have prevented a taxpayer from incurring any late filing penalties with the State or Internal Revenue Service. For any amount owed though, interest accrued for the amount owed for the last 6 months.

One thing to be aware of is many states have online filing systems that can help you quickly file your State taxes like California (CalFile), NY and others.  The IRS has Free File or E-File programs as well to help you quickly get the task completed. However, be cautious in doing this if you plan on itemizing deductions or expenses because your total liabilities will be much higher than if you complete your unfiled tax return with a tax professional or yourself. In relation to the IRS, if you don’t file your taxes eventually the IRS will file a Substitute For Return for you which means that they will just use what information they have on you (W-2, 1099s etc) and you will miss out on any deductions or expenses you wanted to itemize to lower your total tax liabilities.

If you have misplaced important filing documents like a W-2, or 1099, you can contact the IRS toll free (1-800-829-1040) or your State to obtain this information. The IRS will be happy to inform on the status of your account including any taxes owed, what estimated payments have been made, and so forth.

Even if you don’t have the ability to pay outstanding taxes with your State or the IRS, still file a tax return and reach out to a tax professional for help in trying to resolve or possibly settle for less than you owe. If you believe you are owed a refund, then work with a tax expert to ensure you get what is owed to you. Realize that the IRS and many states like California and New York offer Installment Agreements which are basically agreements between you and the State/IRS to pay back your taxes over time or in a series of monthly installments. Many people in this economic downturn are hurting, and Installment Agreements help taxpayers by allowing them to pay liabilities per month instead of all at once. The only downside to an Installment Agreement is you will end up paying more in the end that originally owed because tax liabilities and interest will accrue each month.

Overall, file your taxes as quickly as possible if you have or have not received a filing extension as the penalties and interest will continue to increase your total tax liability. If you did receive an automatic extension on April 15th, 2009, then make sure to file your taxes by this Thursday October, 15th. Work with a tax professional, or use a tax filing assistance program like TurboTax to get the job done instead of having your State or the IRS complete a return for you because again they will not include any expenses or deductions in your return. Tax advantage of the new home purchase tax credit of $8,000 (does not have to be paid back) if you purchased a home between 4/8/2008 and 12/1/2009, as well as teh health coverage tax credit, energy efficiency and renewable energy incentives, unemployment tax benefits credit, transportation, eduction 529 savings accounts and more if applicable which can be read on IRS.gov website or by contacting a tax professional team like us here.

Related posts:

1. What If I Didn’t File My Taxes or Request an Extension to File?
2. How to File for a 2009 Tax Filing Extension
3. Filing a 2011 Tax Extension: 2012 Deadline Dates & How to File