Extension Mysteries

BY: ORLANDO GOTAY

As we come down to the final stretch, it is important to review what must be done if you cannot file your income taxes by the April 15 due date. If you need extra time to file, you are not alone. Over 10 million extensions are granted each year, according to the IRS.

An extension means different things to different people. If you reside outside the U.S. you are eligible for different treatment than your cousin in Tulsa. If as of the due date of the return you are a citizen or green card holder and live outside the U.S., you are eligible for an automatic two-month extension to file and pay the tax due on the return. It’s a special deal for expats and it exempts you from penalties for not filing and not paying by the due date. For 60 days, you would be exempt. Interest from April 15, however, is always due.

The IRS describes this extension as “automatic.” I dread the word. It is automatically granted, but the IRS is not a mind reader. To get this extension, you let the IRS know – by a statement on the return itself when filing. There is no form.

If you are unable to file within the 2-month extension period, you may be able to get an additional 4-month extension to file your return, for a total of 6 months, by using the “regular” extension (Form 4868), filed by the new extended date. The tax must be paid at that time, or the failure to pay penalty begins.

Remember, stateside people must file Form 4868 to request their “automatic” extension. Their extension is filing only, they are expected to pay tax in full by the date due.

Don’t forget to check state requirements for extensions. They will grant extensions on various terms.  Some are truly automatic; some honor federal extensions (they may just mean the Form 4868 extension).  Call to make sure.

The Foreign Bank Account Report (FBAR) has a deadline of April 15, but it has an actual “do nothing, relax, it’s really automatic” 6-month extension until October.

If you e-file, skip this. Time of filing is established by a post office postmark. If you use FedEx, UPS or DHL check for the proper physical address on the IRS.gov website. Only approved categories of service count as “day of mailing = day of filing.”

The IRS website has the details.  File on time!

Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies. His love of things Mexican has led him to devote part of his practice to federal and state tax matters of U.S. expats in Mexico. He can be reached at tax@orlandogotay.com or Facebook: GotayTaxLawyer.