Filing a Tax Extension (For Time)

As the filing deadline approaches for individual tax filers and C-Corporation Tax Filers (both on April 17th), you may find yourself in need of an Extension.  It is important to note that a Tax Extension is one of time, and not an extension to pay.  If you are going to owe taxes, you must pay them by your tax deadline to avoid interest and penalties.  For example, if you know you will owe tax and file your tax return in July (with a valid extension of time accepted by the IRS), that amount due was still due on April 17th. 


Something that we’ve been made aware of is that the IRS could reject your extension if you knew you had tax liability and listed zero tax liability on the extension form.  The new extension forms require tax filers to list any potential tax liability.  If you simply write zero, the IRS could reject the extension based on the following court case.


Crocker v. Commissioner, 92 TC 899 (1989) -- the court held that if a taxpayer files an extension reflecting an anticipated tax liability of zero, but had in his possession at the time of the filing enough evidence to know that the liability would not in fact be zero, the Form 4868 is invalid.


So what does this mean for you?  When completing an extension of time, at least use your prior year tax liability as a minimum guideline and make sure to send some estimated tax payment to the IRS prior to your filing date.


If you are unsure about your tax liability, filing an extension, or any other tax-specific question, make sure to reach out to your Tax Professional with enough time prior to the deadline to answer your questions and provide the help you need.