• Form 4868
• Late Payment Penalty
• Taxpayers Residing Abroad
• Retirement Contributions
• Estimated Tax Payments
• Foreign Bank Account Reporting
A taxpayer who needs more time to complete his or her 2015 individual tax return can request an automatic six-month extension. The extension is obtained by filing IRS Form 4868 on or before the April 18, 2016 deadline.
The extension gives the taxpayer until October 17, 2016 to file a return and avoid the late filing penalty. Normally these due dates fall on the 15th day of the month. However, when they fall on a holiday or a weekend, they are automatically extended to the next business day. April 15, 2016 falls on a Friday, but that is Emancipation Day, a holiday in the District of Columbia. Thus, the due date becomes Monday, April 18, even for taxpayers who don’t live in D.C. October 15, 2016 falls on a weekend, so the extended due date is Monday, October 17, 2016.
There are several issues you may need to consider when filing an extension:
• Late Payment Penalty – The extension will give you extra time to file a tax return but not extra time to pay any taxes owed. If you end up owing when you do file your tax return, you will be subject to the late payment penalty of 0.5% per month (maximum 25%), plus interest on the unpaid amount. Thus, filing an extension but delaying payment can add a substantial amount to what is owed. The 4868 extension form includes the ability to make a payment toward one’s tax liability. To avoid substantial late payment penalties, it is generally a good idea to estimate your tax liability, including any shortfall in withholding or estimated tax prepayments, with Form 4868.
• Taxpayers abroad – June 15, 2016 is the filing due date for U.S. citizens and resident aliens who live and work abroad, as well as for members of the military on duty outside the U.S. As a caution, note that even though these taxpayers are allowed two extra months to file a return, all their tax payments are still due on April 15. Interest will be charged from the April 18, 2016 due date until the date the tax is paid. This 2-month extension is not available to citizens and resident aliens who are merely traveling outside the country on the normal due date. Members of the military and others serving in combat zones have until 180 days after they leave those zones to file returns and pay any taxes due.
• Retirement Plan Contributions – April 18, 2016 is the last day that 2015 contributions can be made to a Roth or traditional IRA, even if an extension is filed. However, 2015 contributions can be made to self-employment retirement plans through the October 17, 2016 extended due date.
• Individual estimated tax payment – Taxpayers, especially those who have filed for an extension, are cautioned that the first installment of the 2016 estimated (ES) taxes is due on April 18, 2016. The first ES payment of the tax year is often overlooked by taxpayers who file extensions, which can lead to an underpayment penalty for that year.
• Foreign Bank Account Reporting (FBAR) – Taxpayers with an ownership or signature authority over certain foreign accounts are required to file online with the Treasury Department on or before June 30, 2016. There are no extensions, and there are stiff penalties. Don’t be confused by the recently passed legislation that changes the FBAR filing due date to the same April due date as the individual tax return. That law does not take effect until 2017, at which time a provision for a 6-month extension will be included.
This office can project your 2015 tax liability to determine if a payment should be made with the extension; it can also file the extension form and, if required, prepare the first 2016 estimated tax payment voucher. Don’t procrastinate; the extension must be filed by April 18, 2016. If you have a FBAR filing requirement, this office can also assist you with that.