Form 4868: reasonable estimate required.

• Author: Hudson, Boyd D.
• Position: Brief Article

A calendar-year taxpayer generally must file his return by April 15 after the close of the calendar year (Sec. 6072(a)). He can obtain an automatic four-month extension by filing a properly prepared Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, by April 15. However, merely filing the form on a timely basis is not sufficient to obtain the automatic extension. A taxpayer must also make a proper estimate of his tax liability, based on the information available to the taxpayer at the time the extension is requested. Failure to make such an estimate when the information is reasonably available can result in an invalid extension.

In the recent case of Healey, TC Memo 1996-260, the Tax Court found that a lawyer and his wife did not make a bona fide attempt to estimate their tax liability on Form 4868, based on the information available to them. For one year, the amount of their estimate was less than 20% of their ultimate liability, and for two other years, the amounts were less than 40% and 66% of their ultimate liabilities. The taxpayer was a partner in a law firm, and he argued that he could not make a better estimate since the partnership tax returns had not been prepared as of April 15. The court...