Jan 19, 2022
As we advised in Tax Tip 20-04 , significant additional disclosure and filing requirements for trusts were announced in the 2018 Federal Budget and are scheduled to apply for trust’s 2021 and subsequent tax years.
One distinct aspect of the U.S. tax system is the ability for a taxpayer to extend the due date of a tax return. This allows the taxpayer additional time to complete and file an income tax return without being assessed a late filing penalty. Late filing penalties are assessed at the rate of 5% per month up to a maximum of 25%.
In most cases a tax return due date can be automatically extended by up to six months. All that is required is the filing of the proper extension form. No explanation from the taxpayer is required and the IRS cannot deny a properly filed extension. However, the timely filing of the form is crucial in order for the extension to be valid.
It’s important to realize that extending the filing due date of a tax return does not extend the tax payment due date. Taxpayers who do not pay at least 90% of the ultimate taxes due by the original due date will be assessed a late payment penalty. The penalty is imposed at a rate of 1/2% per month until paid. Interest will accrue, on both the taxes due and any penalties, from the original payment due date until payment is made. The rate of interest is equal to the short-term applicable federal rate (AFR) plus 3%.
If the due date falls on a weekend or a statutory holiday, the due date is extended until the next business day.
Individual Tax Returns
An individual taxpayer can obtain an automatic six-month extension of time to file by filing Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return,” on or before the original due date of the return. No signature is required and the form can be filed electronically or mailed to the appropriate IRS office. A proper estimate of the tax due for the year must be made, but full payment is not required.
A U.S. citizen or resident who is “out of the country” on the regular due date of a return is allowed an automatic two month extension to file without filing Form 4868. However, if additional time is required beyond this extended due date, the taxpayer can file Form 4868 and will be allowed an additional four months to file the return.
U.S. citizens or residents who do not reside in the U.S. may also request an additional 2 month extension. This extension, however, is not automatic and can be denied by the IRS.
A corporation generally may obtain an automatic six-month extension of time for filing its income tax return by filing Form 7004, “Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns,” provided that the application is timely filed, properly signed, and a remittance is made of the amount of the tax properly estimated to be due. A seven-month extension is available for returns of C corporations with tax years ending June 30.
Partnerships, S Corporations, and Trusts
An automatic extension of time for a partnership, S corporation or trust to file an income tax return can be obtained by filing Form 7004, “Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns.” The length of the automatic extension depends upon the type of return. For partnerships and S corporations, an automatic six month extension is available. For certain estate and trust returns, an automatic 5½ month extension is available.
A summary of U.S. tax return regular due dates and extended due dates is below.
|Type of Filer||Form||RegularDue Date||ExtendedDue Date|
|U.S. citizens and residents||Form 4868||April 15||October 15|
|U.S. non-resident aliens with U.S. employment income||Form 4868||April 15||October 15|
|U.S. non-resident aliens without U.S. employment income||Form 4868||June 15||December 15|
U.S. citizens and residents who reside outside of the United States receive an automatic two-month extension of time to file to June 15. No filing is required for this automatic extension.
|Type of Filer||Form||Regular Due Date||Extended Due Date|
|C Corporations||Form 7004||15th day of the 4th month after the end of the tax year||15th day of the 10th month after the end of the tax year|
|Partnerships||Form 7004||15th day of the 3rd month after the end of the tax year||15th day of the 6th month after the end of the tax year|
|Limited Liability Corporations||Form 7004||15th day of the 3rd month after the end of the tax year||15th day of the 6th month after the end of the tax year|
|S Corporations||Form 7004||15th day of the 3rd month after the end of the tax year||15th day of the 6th month after the end of the tax year|
|Type of Filer||Form||Regular Due Date||Extended Due Date|
|U.S. Resident Trust||Form 7004||15th day of the 4th month after the end of the tax year||First day of the 10th month after the end of the tax year|
|U.S. Nonresident Trust||Form 4868||15th day of the 6th month after the end of the tax year||15th day of the 12th month after the end of the tax year|
|Foreign Trust with a U.S. Owner||Form 7004||15th day of the 3rd month after the end of the tax year||15th day of the 6th month after the end of the tax year|
State Income Tax Extensions
Those U.S. states that impose an income tax also have a provision to extend a tax return’s due date. However, keep in mind that the regular due date and extended due date for a state tax return may be different than the federal dates. Also, each state has a different filing requirement for an extension — some states will recognize a federal extension form while other states have their own forms. It is important to review an individual state’s extension filing requirement.
U.S. TAX TIP is provided as a free service to clients and friends of Cadesky U.S. Tax.
The material provided in this U.S. Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither Cadesky Tax nor Cadesky U.S. Tax can accept any liability for the tax consequences that may result from acting based on the contents hereof.