Filing a Tax Extension

Even with the extended tax filing deadline this year, some taxpayers may still have needed extra time to file their taxes. Most tax software companies make it easy to file Form 4868 to ensure their clients get the extension they need.  

Is it too late for my client to file a tax extension?

Forms for filing extensions are due on the tax filing deadline. This date typically falls on April 15th, but circumstances like federally declared natural disasters and COVID can push it back.

Does filing for a tax extension help avoid late fees?

Yes, but not all late fees. The IRS imposes late fees both for late filing and for late payment. Filing for an extension will help your clients avoid fees for late filing as long as they do file by the extended deadline of October 15th. However, filing for an extension won’t help them avoid penalties for late payment if they owe taxes once they file. If they don’t owe anything or are due for a refund, they won’t face any late payment penalties. 

What is the new filing deadline for clients who received an extension?

Their new tax filing deadline is now October 15th, but it’s usually in their best interest to file as soon as possible. Even though they will not accrue fees for late filing during this time, they could still be accruing fees for late payment.

How do I file taxes for clients with a filing extension?

File your taxes just as you usually would in your Tax software. As long as their Form 4868 was electronically filed or postmarked by the tax filing deadline, they won’t face any late filing penalties. However, if they owe taxes, they may face some late filing penalties. Note: these penalties won’t be reflected when you file your taxes in your Tax software. They’ll receive a notice from the IRS later concerning any late payment penalties. 

What if my client didn’t file for an extension but still has not filed?

They face late filing penalties for every month they don’t file, so it’s important to file as soon as possible. 

What is First Time Penalty Abatement?

Whether your client faced a late payment or late filing penalty, if it’s their first time to incur a penalty from the IRS, they may qualify for First Time Penalty Abatement to help reduce or remove the cost of the fine. The First Time Penalty Abatement is available to taxpayers who: 

• “didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.”
• have “filed all currently required returns or filed an extension of time to file.”
• “have paid, or arranged to pay, any tax due.”

If you think your client may qualify, advise them to call the number on their IRS notice to ask if they are eligible and learn the next steps. If you have representation rights before the IRS, you can assist your client in making this call or make the call on their behalf.