Filing Extension
Authority: IRC §6081; Forms 4868 / 7004
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.
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.
Related terms
Schedule K-1
Schedule K-1 is the form a pass-through entity issues to each owner reporting that owner's share of the entity's...
Quarterly Estimated Taxes
Quarterly estimated taxes are the prepayments the IRS requires from anyone whose income is not covered by...
SEP-IRA
A SEP-IRA is the simplest employer retirement plan for the self-employed: the business contributes up to 25% of each...
First-Time Penalty Abatement (FTA)
First-time penalty abatement is an administrative waiver the IRS grants almost automatically to taxpayers with a...
Stop looking terms up and start putting them to work.
Amadae runs your books, your quarterly estimates, and your tax strategy on autopilot, so concepts like this one turn into actual savings.
Book your free review