A filing extension is the government’s way of giving you some extra time to get your financial matters in order. If, for any number of reasons, you are not able to file your return at the appropriate time then individual taxpayers can fill out IRS Form 4868 which provides an automatic 6 month extension. There is a catch, however. Just because you have extra time to file your taxes doesn’t mean you get an extension related to what you owe.
If you owe taxes at the time at which you file for an extension, interest and penalties can, and do accrue. Furthermore, if you are unable to pay, requesting an extension will only put you deeper in the hole. The fine for failing to file is 5% of the owed amount, per month, up to a total of 25% of the sum in arrears. The penalty for not paying, assuming you filed in a timely manner, is only 0.5% of the amount owed, per month.
Of course, ideally, you will have paid your taxes on time and are expecting a refund, in which case an extension will only delay what is owed to you.
The extension form can be submitted by mail, no later than the date for filing taxes on any given year. It is also possible to file online through E-file – this process takes a few minutes and also must be completed before midnight on the day taxes are due.
Previous incarnations of the filing extension could be filed by phone, and initially offered an extension of 4 months, which could then be extended again for two more months. None of these provisions have been continued.