In the United States, individual federal tax returns are due on April 15th, or thereabouts, every year. Sometimes life doesn’t cooperate and we just can’t manage to file our taxes by then. What should you do if you need more time to file your tax return? Apply for an extension.
Your tax return can be filed any time between the date you have filed an extension and October 15th. Your specific state may have its own rules and regulations regarding extensions. Look in my resource library to find the link to the Navy JAG State Guide information for your specific state.
When it comes to federal taxes, there are several extensions appropriate for different situations, but the most important item to note is an extension to file is not an extension to pay. If you have a balance due after you have filed an extension, interest, and penalties will apply. If you have filed an invalid extension, such as reporting you have zero tax liability and made zero payments, you may have an even worse penalty waiting for you – the failure to file penalty. Penalties can be a conversation for another day. For now, let’s talk about the types of extensions and how to apply for them.
Combat Duty Extension
For military personnel serving in a presidentially declared combat zone, a special extension to file tax returns applies. Often there is place in software to indicate that the service member was in a combat zone to alert the IRS to the fact that there is an automatic extension in place.
The extension time has a two-step calculation of the time allowed.
First, your due date is extended 180 days after the later of:
- The last day you are in a combat zone, have qualifying service outside of the combat zone, or serve in a contingency operation (or the last day the area qualifies as a combat zone or the operation qualifies as a contingency operation).
- The last day of any continuous qualified hospitalization for injury from service in the combat zone or contingency operation or while performing qualifying service outside of the combat zone.
Second, in addition to the 180 days, your deadline is extended by the number of days that were left for you to take the action with the IRS when you entered a combat zone or other qualifying area.
For example, if the service member left for duty in a combat zone on December 20th for a six-month deployment, they will be gone the entire tax filing period of January 1 through April 15th. When they return in late June, they will have 180 days plus the 105 days that were in the filing season to file their tax return. Their following year tax return would not receive an automatic extension if they were not deployed.
For those that file joint returns, only one of the spouses needs to meet these qualifications for the automatic extension to apply.
For this and other awesome information regarding military personnel and taxes, please see IRS Publication 3, Armed Forces Guide.
Extension to Qualify for Foreign Earned Income Exclusion
If you’re out of the country and a U.S. citizen or resident, you may qualify for special tax treatment if you meet the bona fide residence or physical presence tests. If you don’t expect to meet either of those tests by the due date of your return, request an extension to a date after you expect to meet the tests by filing Form 2350, Application for Extension of Time To File U.S. Income Tax Return.
There are two tests mentioned above to qualify for Foreign Earned Income Exclusion – the physical presence and bona fide residence.
If you plan to qualify for the bona fide residence test, the extension date is the one that is 1 year and 30 days (90 days if allocating moving expenses) from the 1st day of your next full tax year (from January 1, 2018, for a calendar year return).
If you plan to qualify under the physical presence test, the date that is 12 months and 30 days (90 days if allocating moving expenses) from your first full (24 hour) day in the foreign country is your due date.
It is important to note that the exclusion is for foreign earned income, not retirement payments, self-employment tax (although the ordinary tax will qualify), investment income, or any other type of income.
This extension is different from the other because it can significantly extend the time to file a tax return. It can also allow for qualification to reduce your U.S. tax liability. The Form 2350 still does not extend time to pay, so taxpayers should take care to calculate the tax due. The Foreign Earned Income Exclusion is prorated for years that are not fully spent outside the country, so it is especially important to have a solid calculation and payment of tax due.
Two Month Extension
If, on the regular due date of your tax return you:
- Live outside the United States and Puerto Rico and your main place of work is outside the United States and Puerto Rico, OR
- Are in military or naval service on duty outside the United States and Puerto Rico,
then you are considered outside of the country and qualify for an automatic extension of time to file your return. Your tax return will be due on or about June 15th, depending on how weekends or holidays fall.
There is no need to file an actual extension to receive this benefit. If you think you will need more time, you should file the Form 4868 for a full extension.
Six Month Extension
This is the “regular” extension. Typically, I recommend those that think the may only need the two month extension to go ahead and file this extension, since it allows for an extra four months, just in case issues arise.
There are three ways to file for a six month automatic extension:
- Pay online and choose extension as your reason. https://www.irs.gov/payments Any payment made online with extension as the reason will be considered an application for an automatic extension to file and an extension will be granted until October 15th. Make payments with debit or credit cards or bank transfers.
- Electronically file by accessing IRS e-file using your home computer or by using a tax professional who uses e-file. Here is the link to the IRS site: https://www.irs.gov/filing/free-file-everyone-can-file-an-extension-for-free
- File and mail paper Form 4868 and enclose payment of your estimate of tax due. I always recommend you send this form via certified mail so you have confirmation of receipt by the IRS. https://www.irs.gov/pub/irs-pdf/f4868.pdf
Tell me about a time you had to file an extension. Was it difficult? Do you have any feel good or horror stories about taxes or filing an extension? Tell me about it! Comment below or tweet to me @ taxladyErin !