A PROCRASTINATOR’S GUIDE TO APPLYING FOR A FILING EXTENSION

If you are frantically scrambling to pull together documents to meet the April 15th tax filing deadline, the Massachusetts Society of CPAs recommends that you consider taking a break and filing an extension. You won’t be alone. Roughly 9 million taxpayers request extra time to get their tax act together and file an extension. Fortunately, it’s relatively easy to request an automatic four-month filing extension. Using IRS Form 4868, Application for Automatic Extension of Time to File U.S. Income Tax Return, taxpayers can extend their filing deadline to August 15. You don’t have to explain why you are asking for the extension. Just be sure to file the form by April 15, 2005 and send in any tax due along with the form. The half-page Form 4868 asks for your name, address, Social Security Number, the amount of tax you owe, and how much you are sending with the request. The form can be mailed, transmitted electronically through computer software or by a tax professional. If you filed a return for 2004, you may obtain an extension by phone for 2005. To access the phone system, call 1.888.796.1074. Be sure to have Form 4868 and your 2004 tax return in front of you. Form 4868 includes complete directions and explains how to pay a balance by phone.

EXTENSION IS FOR FILING – NOT PAYING Be aware that Form 4868 extends the time you have to file your return. It does not extend the deadline for paying taxes due. The IRS requires you to make an accurate estimate of tax liability for 2005 and send payment with Form 4868. Otherwise, you face interest and penalties on the unpaid amount.

CAN’T PAY? FILE AN EXTENSION ANYWAY There are separate penalties for late filing and for late payment. So, you should file for an extension even if you can’t pay the amount due. If you make a good faith estimate of your tax liability at the time of filing your extension, you avoid the dreaded late filing penalty, which accrues at 5 percent every month, and can top out at 25 percent of the total tax due. You will still face interest charges and the late payment penalty, which amounts to 0.5 percent per month, with the maximum penalty set at 25 percent of total tax liability.

BEWARE OF PENALTIES If you find that you cannot file within the 4-month extension period, you may be able to get two more months to file. This extension doesn’t come quite as easily. You’ll need to write a letter to the IRS explaining your situation or file Form 2688, Application for Additional Extension of Time to File U.S. Individual Income Tax Return. The IRS will grant or deny your request and notify you by mail. You should attach this notification to your return when you do file.

SPECIAL RULES APPLY TO OUT OF COUNTRY AND MILITARY TAXPAYERS United States citizens and residents who meet the IRS definition of being “out of the country” on the regular due date of their returns get an automatic two-month extension until June 15 2005. “Out of the country” means either (1) you live outside the US or Puerto Rico and your main place of work is outside the US or Puerto Rico, or (2) you are in military or naval service outside the US or Puerto Rico. There is no need to file a form. Simply file your tax return by June 15, 2005 and attach a statement explaining how you qualify for the extension. Military personnel serving in a combat zone are given extra consideration. For these taxpayers, the deadline for filing and for paying any tax due is extended for at least 180 days after the last day the individual is in the combat zone. If you’re wounded, you could have additional time. These extensions to file and pay also apply to the spouses of those serving.

CONSULT A CPA If you need help either applying for an extension or completing your return, contact a CPA who can assist you in meeting your tax obligations and avoiding penalties and interest.