Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, gives you an automatic 6-month extension to file your return until October 15 with no questions asked. You do not have to sign form 4868. You may submit a paper copy, use the new online “fillable forms” feature, the Free File program, electronically file Form 4868 from a home computer or ask your tax practitioner to file the form. You can also get an extension by credit card payment through one of the IRS’s authorized service providers. Any amount paid to the IRS with Form 4868 is treated as a payment of taxes.
Failure to file penalty
If you fail to request an extension, or fail to file the return by October 15 if you do request an extension, the IRS can impose a failure to file penalty. The penalty is 5% per month of the taxes owed for the month, up to a maximum of 25%. It is advisable to timely file your return on time to avoid failure-to-file penalties, even if you cannot pay your taxes.
Late payment – interest and penalties
There is a late payment penalty of .5% of the unpaid tax. for each month or part of a month that the tax is unpaid. The maximum penalty is 25%. The IRS can decide not to charge a penalty, or can waive the penalty for reasonable cause, but it cannot waive interest. Any grounds for reasonable cause should be explained when you file the client’s return, not on the Form 4868.
IRS payment options
The IRS instructs taxpayers to pay what they can, and the current IRS Commissioner stated the IRS will take a more flexible approach in light of the economic downtown by giving more discretion to individual IRS employees, but how this new policy will be applied is unknown currently.
You can arrange to pay your taxes in 120 days (after April 15) by calling the IRS at( 80) -829-1040. There is no fee if the IRS agrees to this arrangement. Taxpayers will be charged interest but no penalties.
You can ask for an additional six months to pay your taxes, by showing your would suffer “undue hardship” if you paid you tax when due, by filling out Form 1127, Application for Extension of Time for Payment of Tax, and submitting the application by April 15. The IRS will charge interest but no penalties. The requirements are so strict and you must provide a complete statement of assets and liabilities at the end of the previous month, and an itemized list of money received and spent for the previous 3 months.
You can request a monthly installment agreement on Form 9465, for up to five years under this method (generally you cannot owe more than $25,000 in taxes, interest and penalties). You must have filed Form 1040 and indicated the amount of taxes owed, and cannot request an installment agreement under Form 4868. Taxpayers can apply for an installment agreement online (“online payment agreements” (OPAs)). The IRS guarantees that it will approve the installment agreement if the taxpayer owes $10,000 or less, has not entered into another installment agreement in the past five years, and agrees to pay all taxes within three years.
The IRS will charge a fee.
If you owe more than $25,000, you must also submit Form 433-F, Collection Information Statement, with Form 9465. The IRS may be more reluctant to approve an installment arrangement in these circumstances.