Tax Extensions: Terms and Definitions

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Do you ever feel like the IRS is speaking an entirely different language? When it comes to taxes, trying to understand the terminology can be difficult and confusing. That’s why TaxExtension.com has compiled this list of definitions for commonly used terms (arranged alphabetically).

 

1040 Tax Form

IRS Form 1040 is the U.S. Individual Income Tax Return. It is the standard “long form” used to report personal income to the Federal government each year. While this form takes longer to complete (than the 1040A or 1040EZ), it offers taxpayers more opportunities to lower their tax burden. The deadline for Form 1040 is April 15 for calendar year taxpayers.

1040A Tax Form

IRS Form 1040A is also called the U.S. Individual Income Tax Return. It is the “short form” version of the regular 1040 (although it’s longer than the 1040EZ). Taxpayers of any filing status can use Form 1040A to report most income, credits, and deductions to the IRS — but not itemized deductions. The deadline for Form 1040A is April 15 for calendar year taxpayers.

1040EZ Tax Form

IRS Form 1040EZ is the Income Tax Return for Single and Joint Filters With No Dependents. It is the shortest version in the 1040 series — hence the letters “EZ” (it’s the “easy” form) — used to report personal income to the Federal government each year. This return can only be used by taxpayers with zero dependents, whose filing status is “single” or “married filing jointly,” and whose income is below a certain level. The deadline for Form 1040EZ is April 15 for calendar year taxpayers.

1040NR Tax Form

IRS Form 1040NR is the U.S. Nonresident Alien Income Tax Return. If you are not a U.S. citizen, you must determine if you’re a “resident alien” or “nonresident alien” for Federal income tax purposes (via the Green Card Test or the Substantial Presence Test). Form 1040NR is used by nonresident aliens to report personal income to the U.S. government each year. The deadline for Form 1040NR is April 15 for calendar year taxpayers.

1040NR-EZ Tax Form

IRS Form 1040NR-EZ is the U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents. It is the “short form” version of the 1040NR (above); just like Form 1040EZ is the shorter version of the 1040. If you are not a U.S. citizen, you must determine if you’re a “resident alien” or “nonresident alien” for Federal income tax purposes (via the Green Card Test or the Substantial Presence Test). The deadline for Form 1040NR-EZ is April 15 for calendar year taxpayers.

4868 Tax Form

IRS Form 4868 is the Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. It is used by individuals to request an automatic 6-month personal tax extension from the IRS. Form 4868 can extend the deadline for Form 1040, 1040A, 1040EZ, 1040NR, 1040NR-EZ, 1040-PR, or 1040-SS. Note that this does not extend the deadline for tax payment, only for filing. Form 4868 must be filed by the original due date of your return to avoid IRS penalties and interest.

7004 Tax Form

IRS Form 7004 is the Application for Automatic Extension of Time To File Certain Business Income tax, Information and Other Returns. It is used by taxpayers to request an automatic 5- or 6-month business tax extension from the IRS. Form 7004 is designed for corporations, partnerships, limited liability companies (LLCs), estates, trusts, and more. Note that it does not extend the deadline for tax payment, only filing. Form 7004 must be submitted by the original due date of your return to avoid IRS penalties and interest.

April 15

Also referred to as “Tax Day,” this date should be familiar to nearly everyone. April 15 is the general deadline for filing personal income tax returns and paying taxes to the IRS. While you typically cannot get an extension of time to pay your tax balance, you can apply for a filing extension using Form 4868.

Calendar Year

Taxpayers can generally choose to file based on the calendar year or the fiscal year. The term “calendar year” is used to define the 12-month tax period that starts on January 1st and ends on December 31st. The deadlines for the annual returns of calendar year taxpayers are usually March 15 for businesses and April 15 for individuals.

e-file

E-filing (a.k.a. "electronic filing") is an increasingly popular method for reporting taxes. IRS e-file helps reduce the amount of paperwork as well as the amount of time it takes to process tax forms. When you e-file using an Authorized IRS e-file Provider like TaxExtension.com, you know that your personal information is being protected. You can e-file Form 4868 or e-file Form 7004 in just a few minutes and skip those long lines at the Post Office.

Electronic Federal Tax Payment System (EFTPS)

The EFTPS is a free online tax payment service that’s provided by the U.S. Department of the Treasury. EFTPS caters to individuals, businesses, tax professionals, payroll services, and government agencies, and it can be used to pay all Federal taxes. You can choose to pay by telephone or online via the official EFTPS website.

Electronic Funds Withdrawal (EFW)

EFW is a convenient option that allows taxpayers to e-file and e-pay the taxes they owe in one step, while keeping personal information secure. For example, if you’re filing an extension at TaxExtension.com, you have the option to make an online tax payment with your extension request. With EFW, the amount you specify will be withdrawn from your bank account and sent directly to the IRS. This helps you avoid any interest and penalties assessed on unpaid tax.

“Failure to File” Penalty

Also known as the “late filing penalty,” you will incur this charge if you owe tax to the IRS and you neglect to file on time. The penalty is 5% of the unpaid tax, assessed each month your return is late, up to a maximum of 5 months. If your return is more than 60 days late, the IRS will charge a minimum penalty of $135 or 100% of the tax due (whichever is less).

“Failure to Pay” Penalty

Also known as the “late payment penalty,” you will incur this charge if you have an outstanding tax balance, even if you’ve filed a return. The penalty is 0.5% of the unpaid tax, assessed each month your tax remains unpaid, up to a maximum of 25%. The penalty increases to 1% if your tax is still unpaid 10 days after the IRS issues a “Notice of Intent to Levy.” The penalty decreases to 0.25% if you file your tax return on time and set up an IRS payment plan.

Fiscal Year

Taxpayers can generally choose to file based on the calendar year or the fiscal year. The term “fiscal year” is used to define the 12-month tax period that starts on October 1st and ends on September 30th. The fiscal year is broken up into 4 quarters: October 1 to December 31 (1st quarter), January 1 to March 31 (2nd quarter), April 1 to June 30 (3rd quarter), and July 1 to September 31 (4th quarter). If a corporation files based on the fiscal year, its annual return is due by the 15th day of the 3rd month after the close of its tax year.

March 15

Most businesses are required to file their annual Federal tax return by this due date.

October 15

If you were granted an automatic 6-month personal tax extension (using IRS Form 4868), your tax return must be filed by this extended due date.

“Out of the Country”

You may be eligible for an automatic 2-month tax extension if you are a U.S. citizen or resident and you’re out of the country at the time your return is due. No official request or tax extension application needs to be filed to obtain the automatic 2 months, which moves the due date to June 15 (for calendar year taxpayers). However, Form 4868 should be used to request an additional 4-month tax extension, moving the deadline to October 15 (for calendar year taxpayers).

September 15

If you were granted an automatic 5- or 6-month business tax extension (using IRS Form 7004), your tax return must be filed by this extended due date.

Tax Liability

In simple words, this is the total amount of tax that you (as an individual or a business) owe to the IRS. When you are asked to provide your total tax liability for the year, it refers to the total amount of tax that’s assessed on your income before taking into consideration any credits or payments (such as Federal income tax withheld or estimated tax) made during the year.

Taxpayer Identification Number (TIN)

The IRS uses a variety of identification numbers for the administration and enforcement of tax laws. These include the following ID numbers: Social Security Number (SSN), Employer Identification Number (EIN), Individual Taxpayer Identification Number (ITIN), Taxpayer Identification Number for Pending U.S. Adoptions (ATIN), and Preparer Taxpayer Identification Number (PTIN). You are required to provide your unique TIN on your tax returns, statements, and other tax documents. Visit the IRS website for information on how to apply for a particular TIN.

 

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