A filing extension gives more time to file a tax return, not more time to pay. Individuals file Form 4868 for an automatic six-month extension (to October 15), and businesses file Form 7004 (moving March 15 pass-through deadlines to September 15). No reason or signature is required, and extending does not increase audit risk. The catch: tax owed is still due on the original deadline, and the balance accrues interest plus a 0.5% per month late-payment penalty until paid. Filing the extension still matters enormously even when you cannot pay, because it avoids the failure-to-file penalty of 5% per month, ten times worse. A well-run extension includes a projected liability and a payment covering the estimated balance. Extensions also extend useful elections and funding deadlines: SEP-IRA contributions, certain employer plan contributions, and various elections can be made through the extended due date.
Filing Extension
Primary authority: IRC §6081; Forms 4868 / 7004
The authority behind it
IRC §6081; Forms 4868 / 7004
Every entry in this glossary cites the statute, regulation, or IRS guidance behind it.
Worked example
A K-1 arrives in late August, so an investor extends her 1040 in April and pays a $30,000 estimate with Form 4868. Filing in September, her actual balance is $2,000, owed with modest interest but no late-filing penalty.
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