Extension of Time to File Federal Tax Return for Individuals: Form 4868

If an individual taxpayer cannot file his tax return by the due date of the return, the IRS allows most of such taxpayers to request an automatic six-month extension of time to file the return.

In order to do so, the taxpayer should file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, by the return due date. Generally, for the 2010 tax return, taxpayers who wish to take advantage of the extension will need to file Form 4868 on or before April 18, 2011 (the main exception is where a taxpayer operates based on fiscal year).

The most difficult part of filing-out Form 4868 is the requirement to show the “full amount properly estimated as tax” for such taxpayer for the relevant tax year. A taxpayer is deemed to have complied with the requirement when he makes a bona fide and reasonable estimate of his tax liability based on the information available to him at the time he makes his request for an extension.

Failure to properly estimate one’s tax liability may lead to the invalidation of the extension. This means that the return will be considered a regular delinquent return. Such determination, in turn, is likely to result in the imposition of failure to file and failure to pay penalties from the statutory due date. I emphasize that the penalties may be imposed from the original statutory due date where Form 4868 is invalidated.

It is important to emphasize that an extension of time to file is not equivalent to an extension of time to pay. It is generally true that, under the relevant Treasury regulations and IRS Notice 93-22, individual taxpayers still can file a valid Form 4868 and obtain an automatic extension without paying the properly estimated tax in full – this means, of course, that no late filing penalty is likely to be assessed. However, the taxpayers will still owe interest on any past due tax amount and may be subject to a late payment penalty if payment is not made by the regular due date of the return.

It is also important to note that other extension provisions, in addition to the regular Form 4868 automatic six-month extension, may apply, especially for taxpayers who live outside of the United States or who are part of the U.S. military, either on duty outside the United States or hospitalized as a result of injury. More exceptions are made for taxpayers who live in declared disaster areas.

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