Tax Extension
An extension of time to file a tax return, not to pay taxes owed.
Filing Form 4868 grants an automatic six-month extension (to October 15) for individual federal returns. However, an extension to file is not an extension to pay—any taxes owed are still due by April 15, and interest accrues on late payments. Business returns have their own extension forms and deadlines.
Example
A business owner files Form 4868 by April 15 with an estimated payment of $5,000, gaining until October 15 to file the complete return without a late-filing penalty.
Why It Matters for Your Business
Extensions prevent the costly failure-to-file penalty (5% per month), but you still owe interest on unpaid taxes, so estimating and paying by the original deadline is critical.
Practical Tips
- •Always file an extension if you can't meet the deadline—the failure-to-file penalty is 10x worse than the failure-to-pay penalty.
- •Include an estimated payment with your extension to minimize interest charges.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
Related Financial Guides & Resources
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