Rejected extension request

There isn't enough information in your post to give a complete answer. What type of business return was it? Not all business return filing deadlines were extended to July 15 due to COVID. Any return whose original deadline was March 15 was not extended. If you didn't request an extension for a March 15 return by March 15 (and it's obvious from your post that you didn't submit the request in March), the extension would have been denied as non-timely.

Second, there is no 6-month extension from July 15 to January 15. The "automatic" extensions granted on July 15 were only extended to the regular extended due date (October).

Third, I'm assuming that since you didn't get a quick acceptance or rejection, you paper filed your extension request. If so, did you mail it by certified mail to prove timely filing?

You need to determine why. It is possible that the IRS made an error, but it's equally likely that the extension request was denied because it was filed late or incorrectly.

Ira Smilovitz, EA Leonia, NJ

The return in question was extended till July 15. 990 with 8868 extension.

That's what IRS's position is, yes. I was wondering where I would find guidance that that's correct. I thought extensions were relative.

Similarly, this year May 15 is Saturday. If I file for a six month extension, where is the guidance that it's not till November 17?

I had forgotten but when I was looking though receipts today, I found that I had sent it certified. However since January 15 was an invalid request date, it was simply denied.

Hence my question.

Tax Day for individuals extended to May 17: Treasury, IRS extend filing and payment deadline IR-2021-59, March 17, 2021

"Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until October 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due."

Bob Sandler

The information you were looking for can be found in IRS Notice 2020-23 and the underlying regulations. Specifically -

III B. Postponement of Due Dates with Respect to Certain Federal Tax Returns and Federal Tax Payments

For an Affected Taxpayer with respect to Specified Filing and Payment Obligations, the due date for filing Specified Forms and making Specified Payments is automatically postponed to July 15, 2020.

This relief is automatic; Affected Taxpayers do not have to call the IRS or file any extension forms, or send letters or other documents to receive this relief. ***However, Affected Taxpayers who need additional time to file may choose to file the appropriate extension form by July 15, 2020, to obtain an extension to file their return, but the extension date may not go beyond the original statutory or regulatory extension date.*** [emphasis added]

For example, a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, may be filed by July 15, 2020, to extend the time to file an individual income tax return, but that extension will only be to October 15, 2020. That extension will not extend the time to pay federal income tax beyond July 15, 2020.

So an extension was filed before April 15 for three months to July 15. This leaves an additional 3-month, non-automatic extension as a possibility, not an additional 6 months. I'm not familiar with the underlying regs for exempt organization returns, but I would think the only question(s) remaining are: did the 8868 extension request you submitted effectively extended the filing deadline to October 15 or was it mooted by the universal extension of the April filing deadline; and was the actual return filed between July 15 and October 15.

IR-2021-59, IR-2021-67, and IRS Notice 2021-21 provide the guidance for returns being filed in 2021.

Yes. Certified mail won't help with an invalid request.

Ira Smilovitz, EA Leonia, NJ

Thank you.

Assuming the taxes were paid timely, what does the IRS due with respect to a late filed return? Seems almost "no harm, no foul". Almost.

In a normal year, the 990 is due on the 15th of the fifth month after close of the tax year, so May 15 for calendar year filers. One may request an automatic 6 month extension till November 15. When the filing date was extended till July 15, I thought I could request a 6 month extension till January 15, but IRS disagreed and denied my extension request.

With certain exceptions, organizations that file 990s have no tax liabilities and the penalty for late filing isn't based on taxes owed.

With a few exceptions (some information returns, partnership return come to mind) late filing penalty is a percentage of tax unpaid by the due date. So yes, NHNF. But, if a late filed return later generates a subsequent tax assessment - math error correction, unreported income, audit assessment, etc. - the late filing penalty will be computed on the newly assessed tax.

What about for other types of entities,with tax liabilities?

I don't know. I've never had to file a return like that.

Corporations and partnerships are required to file a return even if they have no income. The penalty is minor, though.

That brings up the related question - what is the penalty for an individual who fails to file a return on time but who pays the required taxes on time? For example - and this is actually a real-life case - an individual owes approximately $1000 on their 2020 taxes. They file an extension request with form 4868 before the tax deadline (May 17th) and they pay their required taxes before the deadline. They now have until October 15th to file the actual return. Suppose for whatever reason, they fail to file that return on time. Let's say they don't file until November 15th or December

15th or even January of 2022. What is their penalty, since at that point they theoretically don't owe any money?

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The failure to file penalty is 5% of the unpaid tax per month up to a maximum of 25%. The apparent penalty in this situation would be $0, but the risk is that the statute of limitations for the government to assess tax doesn't begin until the return is filed. The statute of limitations for claiming a refund of overpaid taxes begins on the due date for filing the return. (This last statement is a generalization as there are circumstances which will extend the refund statute in whole or in part.) The added risk is that while all income is taxable unless specifically exempted, all deductions are ",,,allowed as a matter of legislative grace, and only as there is clear provision therefor can any particular deduction be allowed, and a taxpayer seeking a deduction must be able to point to an applicable statute and show that he comes within its terms. " (White v. United States, 305 U.S. 281 (1938)). What this means practically is that the IRS can disallow every deduction claimed on the late filed return and force the taxpayer to cross every t and dot every i to justify the deductions.

Ira Smilovitz, EA Leonia, NJ

In this case, it would just be standard deduction. It's a very simple return, but for complex reasons related to the stimulus payments, the taxpayer is delaying filing as long as possible. The interesting thing is that when the late return is filed - the amount owed will be zero because the taxes were paid with the extension request.

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