Tax Extension is a provision that allows individuals and businesses to request additional time to file their tax returns beyond the original deadline. Filing a Tax Extension helps avoid the failure to file penalty, which is calculated based on the amount of tax owed. If the tax return is more than 60 days late, then the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less. Generally the penalty amount is 5% of the unpaid tax amount for each month or part of a month that the return is late, up to a maximum of 25% of the unpaid tax.
In the United States, the standard tax filing deadline for most individuals is April 15th. However, if you are unable to complete your tax return by this date, you can file for a Tax Extension, which will grant you extra time to submit your return. To request this, you need to file the appropriate form with the tax authority. For individual taxpayers, this is typically Form 4868, while businesses may use Form 7004. The extension period varies depending on the type of taxpayer and the jurisdiction, but it is usually around six months. For example, if you file for an extension by the April 15th deadline, you will typically have until October 15th to submit your tax return.
It’s important to note that a Tax Extension only extends the time to file your return, not the time to pay any taxes owed. If you anticipate owing taxes, then it is still necessary to estimate and pay the amount due by the original deadline to avoid penalties and interest charges. Failing to pay the taxes owed by the deadline can result in additional fees and interest being assessed. If you file your return on time but fail to pay the full amount of tax owed, then you may be subject to the failure to pay penalty, which is generally 0.5% of the unpaid tax amount for each month or part of a month that the tax remains unpaid. The interest is calculated based on the federal short-term rate plus 3%.
Our team provides expert guidance on the Tax Extension process, including which form to file and the necessary documentation required, develops a tax planning strategy during the extension period, identifies potential deductions or credits and how to minimize your tax liability, and guides on the estimated tax amount to pay and the deadlines for making these payments.
