With regard to U.S. Individual Tax Returns, a tax extension is a grace period offered for taxpayers who need more time to file taxes and want to avoid penalties. The Internal Revenue Service (IRS) allows citizens to file Form 4868, "Application for Automatic Extension of Time to File U.S. Individual Income Tax Return". Although the IRS allows six extra months to file the return, it doesn´t give you extra time to pay the taxes you owe.
Estimate your tax burden and pay it promptly when the form is filed. The extension form and payment are due by the regular tax deadline. Filing the tax extension when you are not prepared to file your complete return is the only resource for avoiding costly penalties.
If you don´t file either your return or Form 4868 by the April 15th filing deadline, you will be subject to a late filing penalty which is five percent (5%) of the amount you owe for each month, up to a maximum of twenty-five percent (25%). If you don´t pay at least ninety percent (90%) of the amount owed by the regular tax deadline, you might be subject to a late payment penalty which is usually half of one percent (1%) of the amount owed for each month, up to a maximum of 25%.
If you are a U.S. citizen or resident alien and are out of the country on the due date, you do not have to file for a six-month tax extension unless you need more than two months to file and/or pay taxes. In this case, you have two extra months to file your return and pay the amount due without request.
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