Filing an extension on your taxes should be a last resort option. Extensions are filed to alert the IRS that it will take you longer than the April 15 deadline to complete your tax forms, but it does not exempt you from penalties for not paying your taxes. There are several ways to file an extension, and some tax filers are eligible for additional extensions beyond the standard.

Filing

As of the 2009 tax year, to file an extension, fill out IRS Form 4868, which asks you to estimate your tax liability. You can file this form by mail or by using an e-file service or computer program. You can also get an extension without filing Form 4868 by paying part or all of your estimated tax liability, but you must use a payment service authorized by the IRS. The standard extension is six months, making your new deadline October 15.

Paying

After filing an extension, you must file your tax return by October 15 of that year to avoid penalties, but you are not exempt from interest accrual on any unpaid tax liability. If you file an extension, but do not pay at least 90% of your estimated tax liability by April 15, a 0.5% per month late-payment penalty will apply to any unpaid balance (maximum penalty 25%). However, if you do not file an extension, your return is subject to a 5% per month penalty on any unpaid balance (maximum penalty 25%). When you file your tax return, enter any estimated tax liability amount you paid on the appropriate line (e.g., line 60 on the 2009 Form 1040). If you have overpaid, you can get a refund of the excess amount. If you have paid less than 90% of your tax liability, interest will be charged on the underpaid amount from the April 15 deadline.

Special Rules

Special rules apply for some types of extensions. Filers who are out of the country when their extension expires may be able to receive an additional two-month extension to December 15, by writing to the IRS. If you are a US citizen or resident living outside the United States on April 15, you have an automatic two-month extension to June 15 to file your tax return. You must attach a statement to your return explaining why you qualify for this extension. You may get an additional four-month extension by filing Form 4868. If you are/have been serving in or as direct support to the military in a combat zone or qualified hazardous duty area, you have an automatic extension to file in the relevant tax year. The IRS explains, "In general, the deadlines for performing certain actions applicable to [your] taxes are extended for the period of [your] service in the combat zone, plus 180 days after [your] last day in the combat zone." (See Reference 3) There are several particulars to this situation, so check the IRS website on military service for more details.

Source:

IRS Publication 17 (2009): Your Federal Income Tax

IRS Federal Income Tax Extension Information

Extension of Deadlines - Combat Zone Service

More Information:

Form 4868 (2009), Application for Automatic Extension of Time To File U.S. Individual Income Tax Return