The deadline looms for filing your 2009 Federal and California income tax returns. They are due on Thursday, April 15, 2010, along with any balance due.

If you are unable to file your 2009 federal income tax return by April 15 you can now request an automatic six-month extension of time to file your tax return until October 15, 2010 by filing Form 4868. You do not need a reason for the extension nor a signature on Form 4868 which must be filed on or before April 15.

Automatic extensions of time for individuals are available by

“Efiling” Form 4868 electronically at www.irs.gov or submission of a paper Form 4868. An extension can also be filed through a credit card company authorized by the IRS to accept payments. Please be aware that you will be subject to an extra charge if you use a credit card company.

You will no longer be required to pay the estimated tax balance due with the extension form in order to receive an extension of time to file your tax return. However, you are requested to properly estimate your 2009 tax liability using the information available to you. Generally, it is a good idea to pay your estimated 2009 tax liability with Form 4868 to minimize interest and penalties.

It is extremely important for you to either file a timely tax return or a timely extension of time to file. The failure to file penalties are dramatically higher than the failure to pay your tax on a timely basis.

If you are required to make quarterly estimated payments, you should consider adding all or part of your 2010 first quarter estimated payment to the extension payment. Paying an additional amount with Form 4868 rather than making an estimated payment on April 15 for the next year is easier and provides greater protection against an invalid extension if income has been underestimated.

Generally, the tax return and any unpaid tax will ultimately be due by the final extension date of October 15. Interest will be charged on the late payment from April 15 to the date of filing. The current rate of interest for the IRS is 4% effective as of April 1, 2010. It is advisable to pay as much as possible with the extension to minimize interest and penalties.

California has a “paperless” extension process. You are simply granted an automatic extension of time to file your California return until October 15, 2010. Any estimated California balance due should be paid on April 15 by filing FTB 3519 “Payment Voucher for Automatic Extension for Individuals.” Failure to pay all tax due by April 15 will result in interest and late payment penalties being assessed. Additional information is available at the website: www.ftb.ca.gov.

If you do not have sufficient funds to pay your federal tax balance due on your 2009 return, consider setting up either a monthly installment plan or a short term extension of up to 120 days.

The IRS has made it much easier in recent years to pay in installments for individuals owing $25,000 or less in combined tax, interest and penalties. The IRS has an interactive installment agreement calculator for your use at the IRS website: www.irs.gov. If the combined tax, interest and penalties exceed $25,000 you may still qualify for an installment agreement. However, Form 433F “Collection Information Statement” may also be required.

You can also make your request manually by attaching Form 9465 “Installment Agreement Request” to the front of your 2009 balance due federal income tax return. Indicate on Form 9465 the amount you are able to pay at the time of filing, your proposed monthly payment and the date each month you intend to make such payments. The IRS expects your proposed installment plan to be reasonable and will usually act on an installment payment request within ten days if submitted electronically.

There is an administrative charge of up from $43 to $105 for establishing a monthly installment agreement. Interest and late payment penalties may also be due. Other rules include the requirement for the taxpayer to meet all future tax liabilities on a timely basis. If you fail to make your installment payments, collection of the tax can be accelerated. If you request a short-term extension of time to pay of up to 120 days there are no administrative charges.

The State of California has a similar installment payment arrangement. File California Form FTB 3565 “Installment Agreement Request” if you have a financial hardship and are unable to pay your California income tax in full. The California system allows monthly payments to be made directly from your bank account via electronic funds transfer (EFT).

Special rules for extensions to December 15, 2010 apply to taxpayers living abroad on April 15. Men and women serving in a combat zone or who are qualified hazardous duty area participants are entitled to special extension rules. See Publication 3 “Armed Forces Tax Guide” at the IRS web site, www.irs.gov for details.