Filing Taxes Late? When and How to File for an Extension

Filing taxes by the annual deadline can be difficult, or even impossible for some service members and military families. You may already be familiar with the automatic extension for military filers in a combat zone. However, there are other options for extensions that service members and their families may be able to use to file taxes late.

Note: This article pertains only to Federal Tax Return extensions unless otherwise stated. States and locality policies on extensions do not always mirror the Federal Tax Code.

Why Should You Get a Tax Return Extension?

First of all, not all extensions are created equal.

Some tax extensions extend the time you have to file your taxes, but not the time you have to pay them (if you owe taxes).

But, even if you can’t pay your taxes, you should file an extension to minimize your penalties.

For federal taxes, the failure to file (on time) penalty accrues at a rate 5% of the balance you owe each month. Failing to pay your taxes results in a smaller, .5% per month penalty.

There is a minimum failure to file a penalty and interest accrues on any taxes you owe.

Do You Need to Use a Tax Return Extension if You’re Getting a Tax Refund?

The IRS calculates penalties for failing to file or pay taxes on time based on how much you owe in taxes.

If a taxpayer is supposed to get a refund, the penalties don’t apply.

Taxpayers who get a refund and file late typically don’t have any issues. In most cases, if you want to get your refund, you need to file the tax return within three years of the original filing deadline.

In a few very specific cases, the IRS has issued refunds beyond three years from the filing date, but they have literally taken acts of Congress to happen.

Whether you owe taxes or if the IRS owes you, there are several reasons why it is wise to make use of an extension if you are able:

• If your return isn’t complete, you may be mistaken about getting a refund. If you are, you’re subject to penalties and interest.

• If you have future or previous tax issues, it helps to have a record of on-time tax returns and extensions (when an extension is needed). Some taxpayer relief programs require you to be up to date with your taxes and tax filings.

• State and localities (cities and counties) may require a federal extension for an extension. If you owe state or locality taxes, you can be subject to penalties for late filings. Also, I am aware of some localities that impose a late filing penalty even if you are getting a refund. I am not aware of a state that has a late filing penalty when you are getting a refund, but tax codes do change periodically.

• For extensions that require a form or letter to request the extension, filing for one may help you avoid complications and unwanted IRS attention.

Without the extension, the IRS may reach out to you and ask you to pay some taxes, interest and penalties if they think you owe them money – even if you really don’t. The IRS may not have the full picture. For example, maybe you put in solar panels and are eligible for thousands of dollars of reduction in tax liability due to the residential energy efficient property credit. The IRS isn’t keeping a file of annual pictures of your house, so it wouldn’t know if your tax liability dropped to the point that you were going to receive a refund.

• You may need to show that you filed an extension or are eligible for one to apply for government assistance programs, non-profit assistance, employment or a loan. In some cases, you may need to have filed a tax return to receive a benefit like the Covid-19 stimulus payments.

MORE:

How to Do Taxes Like a Pro

How do I Get a Tax Filing Extension?

Let’s look at the various types of extensions. Some are simpler to use than others. I suggest you go with what is easiest and most advantageous for your situation. But, if you need a record of the extension before actually filing the tax return, your options are limited.

Tax Return Extensions for Military Combat Zones and Contingency Operations

Yes, this extension – commonly referred to as the Combat Zone Extension – may be the most helpful one.

You qualify for this extension if you are a armed forces member and have qualifying service in a combat zone. Some service outside of combat zones qualifies, including certain contingency operations.

Usually, the qualifying service member’s spouse qualifies for the extension as well. IRS Publication 3 provides details on criteria for both service members and spouses. The combat zone extension applies to the filing deadline, tax payments, claiming a refund and other actions with the IRS.

This extension pushes your filing deadline out to 180 days from your last date in the combat zone, qualifying service outside a combat zone, or in a contingency operation.

If you were hospitalized for an injury from service that qualifies for the extension, you have 180 days from the end of your hospitalization to file.

If you started your tour of duty before the original filing deadline, you can extend the 180 days by the number of days between the start of your service and the filing deadline. For example, if the original filing deadline was April 15 and your qualifying service began on March 1, then you can add 46 days to the 180-day deadline for a 226-day total extension.

The combat zone extension is automatic and does not require you to file a form or request an extension before you file your tax return.

It is a valuable extension due to its breadth of actions, so if you need an extension and believe your service outside a combat zone qualifies, check IRS publication 3 or consult with a tax professional.

Military OneSource can connect you with tax consultants for free.

Tax Extensions When You’re Living Overseas

You are allowed an automatic two-month extension to your time to file if you live abroad.

You qualify for this extension if your main place of business or duty station is outside the United States and Puerto Rico, or if you are in military service outside the United States and Puerto Rico.

This extension does require that you pay interest on any tax due that you didn’t pay by the original filing deadline.

Also, the automatic two-month extension applies to married couples filing joint returns, even if one spouse does not otherwise qualify for this extension.

If spouses file separate returns, only the one living overseas qualifies for the extension.

This extension is automatic. You do not need to apply for it in advance, but you do need to attach a statement to your tax return indicating how you qualify for the extension.

How to Get a Six-Month Tax Return Extension

All taxpayers are eligible for an automatic six-month extension if you file Form 4868 on paper or electronically by the tax filing deadline This extension only applies to the time to file.

So if you owe taxes, you can still accrue tax penalties and interest. Overseas taxpayers may file form 4868 by the end of their automatic two-month extension But, if you owe taxes, you’ll still pay interest on the balance of any taxes not paid by the original filing date. Failure to pay penalties begin to accrue after the two-month overseas extension expires.

Can You Request More Time to File Taxes if You’re Out of the Country?

Yes, if six months is not enough to file from our overseas location, you can ask for an additional discretionary two-month extension. To get this discretionary extension, you must send the IRS a letter explaining why you need it. If you need to request this extension, take a look at IRS publication 54.

Do You Need More Time to Qualify for the Foreign Earned Income Exclusion or the Foreign Housing Exclusion or Deduction?

If you’re living overseas and need more time to meet the bona fide residence or physical presence tests for the foreign earned income exclusion or foreign housing exclusion or deduction, you might be able to request an extension.

Military spouses may qualify for one of these valuable exclusions or the deduction if they aren’t working for the United States Government. Contractors, however, are still eligible.

To request an extension for this purpose, file Form 2350 by the original tax filing deadline. This extension generally approves this extension for 30 days past the date the taxpayer can be reasonably expected to meet either the bona fide residence or physical presence test.

Tax Extensions for Military Members

Yes, you can request a tax payment extension if you are performing military service. But, you must notify the IRS that your military service has substantially impacted your ability to pay income tax.

IRS Publication 3 outlines the process for requesting this extension, but you should speak with a tax professional before you make the request.

You have up to 180 days after your military service ends to pay your taxes if approved. If you pay the tax in full by the end of the 180 days, then you won’t owe penalties or interest.

Tax Return Extensions for Natural Disasters

Sometimes you may get an extension and other tax relief due to a natural disaster. The IRS can institute these extensions based on FEMA declarations and presidentially declared disaster areas. Congress can also pass laws specifically permitting extensions and tax relief after disasters like hurricanes and wildfires.

In the case of Covid-19, all individual taxpayers received an extension two years in a row.

Tax relief and extension details vary in these cases. Speak with a tax professional or check out IRS.gov to see if you qualify.

Should You File a Tax Return Extension?

The short answer is yes, when you need one.

Do you need more time to gather documents? Do you need more time to follow IRS instructions and figure out the tax code?

Do you need more time to pay if you qualify for a payment extension? Remember, if you aren’t able to pay your bill in full at the filing deadline, but you can finish your tax return accurately, make sure you either file the tax return or do an extension.

You want to avoid the failure-to-file penalty because it is an added unnecessary expense.

The IRS offers programs to provide relief for taxpayers including payment plans, penalty relief, and other forms of taxpayer relief for qualifying taxpayers.

Use an extension when it makes sense for your situation, but don’t stick your head in the sand and hope that a negative tax situation goes away. The IRS doesn’t forget.

If you need professional assistance, you can find an unbiased IRS-provided list of credentialed tax return preparers here. I’m on that list, and available to help you here as well.

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