The Internal Revenue Service (IRS) has indicated in Publication 509 (Tax Calendars for 2006) and in the draft version of Form 4868 (Extension of Time to File for Individuals) that instead of a four-month extension, it will grant individuals an automatic six-month extension for filing 2005 returns (generally four months if they are out of the country).
Taxpayers will be able to request an automatic, six-month tax-filing extension for most common individual and business returns under regulations released last week by the Treasury Department and the Internal Revenue Service.
Background. Taxpayers who can't complete and file a tax return by the regular due date can generally get an extension of time to file. For tax year 2004 (and earlier years), individuals could obtain an automatic extension for a four-month period by filing Form 4868. Taxpayers who needed more time could apply for an additional non-automatic two-month extension by filing Form 2688 (Application for Additional Extension of Time to File U.S. Individual Income Tax Return). IRS would decide whether or not to grant the additional two-month extension based on the taxpayer's application.
The new regulations provide streamlined and simplified procedures that are expected to save taxpayers between $73 million and $94 million, annually, by eliminating or consolidating several existing IRS forms.
The new procedures will replace the existing two-step process under which non-corporate taxpayers could only get a six-month extension by first obtaining an extension, usually automatic, for part of that period and then requesting a discretionary extension for the remainder.
"Some taxpayers need a full six months for extensions as the law provides. This change simplifies the process so they can make the request just once, not twice,” said IRS Commissioner Mark W. Everson.
As a result, beginning with 2005 returns due in 2006, individuals will be able to use a single IRS form (Form 4868) to get an automatic six-month extension of time to file, without a reason or even a signature. This will replace the existing two-step process under which an automatic extension was only allowed for four months, generally until August 15. If more time was needed, a taxpayer had to explain why, using a second extension request form (Form 2688). About 6% of individual taxpayers request the initial four-month extension, and about a third of those go on to request a second extension, usually for two months until October 15. Form 2688 will be eliminated for 2005 returns
For example, a calendar year individual whose 2005 return is due on April 17, 2006 (because April 15 falls on a weekend) who files Form 4868 would have until October 16 to file under the extended six-month extension.
The extended automatic extension will particularly benefit taxpayers with interests in pass-through entities because it is more likely that they will receive the partnership or S corporation Schedule K-1s necessary to complete their individual returns within the extended automatic period than was previously the case. The extended extension should ease the filing burdens of partners and S corporation shareholders by eliminating the need to file returns with estimates of income from the entity. It will be far more likely that individuals will receive S corporation and partnership K-1s before the expiration of the extended due date, making it unnecessary to use estimates and then file amended returns.
Filing extensions do not extend the time for paying the tax and can't be granted for more than six months, except for taxpayers who are abroad.
Extension procedures will also be streamlined for business taxpayers, thus eliminating three existing forms. Under existing procedures, only corporations can request an automatic six-month tax-filing extension. The new regulations will also make this option available to most non-corporate business taxpayers, including partnerships and trusts.
Accordingly, starting January 1, all eligible business taxpayers will use Form 7004 to request an automatic six-month extension of time to file. In the past, eligible non-corporate business taxpayers had to request an initial three-month extension and, if more time was needed, then request another three months.
