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Filing a tax extension for your 2020 returns

Key Points

  • The IRS will allow an extra six months to file your tax forms for individuals who ask for an extension. However, any taxes you owe for the 2020 tax year are still due on April 15, 2021.

  • The methods for applying for an extension are found on IRS Form 4868.1 However, you are still required to estimate and pay your tax bill by the original filing date.

  • Small business owners may get more time to contribute to certain retirement accounts and should verify that time frame with their tax preparer.

  • The deadline to make previous year contributions to your IRA or Roth IRA is the same as the filing deadline, April 15, 2021.

 

Having trouble finishing your taxes? Maybe you’re still waiting for tax information or are still sorting out your deductions. Whatever the case, by filing for a tax extension the IRS will automatically extend the deadline to file your tax forms. Here’s what you need to know.

Tax dates to remember

  • Deadline to file 2020 individual income tax returns 
  • Deadline to file for an extension (see Form 4868) and pay any taxes owed to the IRS
  • Deadline for 2020 IRA contributions
  • Consider any relevant state tax due dates to determine if any extension requests are necessary for the state
  • Deadline to file 2020 individual income tax returns (if you filed an extension with the IRS)

You still have to pay taxes owed by April 15

Filing for a tax extension only means you can extend the deadline to submit your tax paperwork. If you owe any taxes, payment is still due by April 15. Your tax payment may be reduced by any amounts already paid through withholding or prior estimated tax payments. By filing an extension and making a large enough payment, you may be able to avoid interest charges as well as any IRS penalties related to late filing and/or late payment2. The penalties for failure to file a tax return or pay taxes when due can increase your tax bill the longer you delay, and can each approach 25 percent of the tax due.

How to file a tax extension for an individual

  1. Estimate your tax bill. Do a rough draft of your Form 1040 or consult with your tax preparer to find out what you will owe in taxes this year. If you find you are actually due a refund, you may not need to worry about your tax bill but will want to file for the refund.
  2. Download and read Form 4868. This form will ask you for your estimated total tax liability and total payments (both estimated tax payments and withholding) for 2020 to determine the balance due, if any, with your extension.
  3. Following the Form 4868 instructions, mail or electronically file the extension form with your payment by the April 15 deadline; instructions for each are included on Form 4868. Your tax return will not be due until Oct. 15.3

Small business tax extensions rules

  • If you are self-employed and filing for an extension for your personal taxes, you will have until the Oct. 15 deadline to file the paperwork for your individual tax return. However, any taxes you owe are still due on April 15.
  • You must continue to fund your SIMPLE IRA (savings incentive match plan for employees) until year end.
  • Your individual 401(k) plan must be set up by your business’s fiscal year-end. You can make employer/profit sharing contributions up until your business’s tax filing deadline, plus extensions. Additionally, your individual 401(k) plan operates on a business tax year. For many business owners this is January 1 through December 31, giving your plan an effective date of January 1 of the year the plan is established. 
  • You can set up a SEP plan for a year as late as the due date (including extensions) of your business's income tax return for that year.
  • Remember that the IRS requires that we code SEP or SIMPLE contributions in the calendar year they are received. An employer may, however, report the contribution for the prior plan year when filing their tax return. For more information on the IRS requirements, please see Instructions for Participant on the back of Form 5498 Line 8 (SEP contributions) or Line 9 (SIMPLE contributions).
  • Remember that individuals cannot make prior year contributions to a traditional and/or Roth IRA past the April 15 deadline.
  • Work with your tax preparer to file the correct forms for requesting an extension.

Your advisor and tax preparer can help answer your questions about your tax situation.

Find answers to your retirement questions

Take the 3-Minute Confident Retirement® check

1 Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.
2 You may also owe additional tax if you didn't make your tax payments during the year in a timely manner because there is an underpayment of estimated tax or an underpayment of withholding during the tax year. 
3 The IRS will contact you only if the request is denied.
Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.
Ameriprise Financial Services LLC. Member FINRA and SIPC.