Monday, November 07, 2005

IRS Automatic 6 Month Extensions for Income Tax and other Returns Now Allowed

Old Rules. Currently, most taxpayers other than corporations can receive a full six-month extension of time to file their income tax returns, but to obtain the full six-month extension they must file one application for an initial extension of time and then a second one. For example, individual income taxpayers request an initial four-month automatic extension on one form and then use a second one to request a two-month discretionary extension. Similarly, trusts and partnerships request an initial three-month automatic extension on one form and then use a second one to request a three-month discretionary extension.

The Change. To reduce the complexity of the pre-existing extension process, and to provide cost savings and other benefits to taxpayers and IRS, new regulations simplify the extension process by allowing most taxpayers to file a single request for an automatic six-month extension of time to file.

New Rules - Individuals. An individual may obtain an automatic six-month extension to file an income tax return by submitting a timely, completed application for extension on Form 4868. There is no need to sign the request or explain why an extension is sought. As under the pre-existing process, taxpayers must make a proper estimate of any tax due and failure to pay any tax as of the original due date of the return may subject the taxpayer to penalties and interest. (Reg. § 1.6081-4T )

New Rules - Corporations. The regulations don't change the rules on filing extensions for corporate income tax returns. Currently, corporations may obtain an automatic six-month extension of time to file their income tax returns by submitting Form 7004, Application for Automatic Extension of Time To File Corporation Income Tax Return. Corporations don't have to sign the extension request or give a reason for the request. Form 7004 does not extend the time for payment of tax—corporations filing Form 7004 must compute the total amount of their tentative tax and make a remittance of any balance due.

New Rules - Gift Tax Returns. Under Code Sec. 6075(b)(2) , an individual who makes a gift and who requests an automatic extension of time to file his income tax return is deemed to have an extension of time to file the return required by Code Sec. 6019 . Donors who do not request an extension of time to file an income tax return to request an automatic six-month extension of time to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, by filing a new version of Form 8892, Payment of Gift/GST Tax and/or Application for Extension of Time to File Form 709. ( Reg. § 25.6081-1T ) Under the regs, Form 8892 no longer requires an explanation of the need for the extension of time to file or a signature.
Warning! An extension to file a tax return is NOT an extension to pay the taxes due under the return. If a sufficient tax payment is not made by the original due date of the return, penalties will likely apply for the late payment.
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