Understanding Tax Return Extensions for 1040 and 1120 Clients
Tax season can be a period of intense pressure for both individual and corporate clients, but understanding the intricacies of tax return extensions can alleviate some of that stress. Tax professionals often find themselves filing extensions for Forms 1040 and 1120, as circumstances such as missing documents, emergencies, or system failures may delay submissions.
The Internal Revenue Service (IRS) has set April 15th as the deadline to file for an extension for both corporate (Form 1120) and individual (Form 1040) tax returns. It’s crucial for clients to understand that an extension to file does not equate to an extension to pay any taxes due. To avoid penalties, estimated taxes should be paid by the original deadline.
Automatic Extensions and Special Considerations
In certain situations, clients automatically receive an extension and are not required to file a request. For instance, taxpayers in federally declared disaster areas are granted relief without the need to apply for an extension. Similarly, U.S. citizens or resident aliens outside the country on the due date receive an automatic two-month extension to file and pay taxes, although interest on unpaid taxes still accrues from the original due date.
Filing for Individual and C Corporation Extensions
Individual taxpayers can request up to six additional months to file their tax returns. The IRS offers three methods to request this extension: electronic payment indicating an extension, e-filing Form 4868, or submitting a paper Form 4868. For C corporations, Form 7004 must be used to request a six-month extension. This form must be completed accurately and submitted by the original due date of the return.
Dealing with Rejected Returns
If a tax return or extension is rejected upon submission, there is a grace period to correct and resubmit. E-filed Form 1040 returns and extensions have a five-calendar day perfection period, while Form 1120 submissions have a ten-calendar day period for returns and a five-calendar day grace period for extensions.
Client Participation in the Extension Process
While timely filing is always preferred, it’s important for clients to be aware of their options regarding extensions. Communication is key in ensuring clients are prepared and understand the necessary steps should an extension be required. Tax professionals can leverage tools like Thomson Reuters UltraTax CS and SurePrep TaxCaddy to streamline the filing process, enhancing efficiency and client collaboration during tax season.
For those looking to optimize their tax workflow and increase productivity, Thomson Reuters offers customized demos of UltraTax CS, showcasing how this solution can benefit tax professionals and their clients.