With a little over a week to go for this tax season taxpayers are facing the critical decision to file an extension or work fast to get their returns filed by the deadline. If you need more time, it’s best to file for an extension. You’re better off taking a little extra time to complete your return accurately the first time around rather than risking a mistake and having to amend in the future.
What is an Extension?
An extension is exactly what it sounds like, an extension of time to file your tax return. Whether you are a taxpaying business or individual, the federal government (and states) allow for an extension of time to file your tax return. Extensions grant you six months from the original filing deadline to complete your return. For example, a calendar-year individual that files an extension by April 15th (typically the original due date) will be allowed an additional six months (until October 15th ) of that same year to file their return.
Not an Extension to Pay!
An extension to file a tax return is NOT an extension of time to actually pay your taxes. Most taxpayers think when they file an extension that they are also extending the time they have to pay their tax bill but that is not the case. At best, any ensuing penalties & interest may be reduced, but any taxpayer that files an extension without making an estimated payment will owe penalties & interest on the unpaid balance once they file.
Why You Should File an Extension (if you need one)
Filing an extension puts the government on notice that you are aware your return is due but that you have yet to prepare it. You don’t need to provide an explanation for extension; you just need to request one. Most everyone is granted an extension automatically at the federal level and almost every state honors the federal extension too. Bear in mind, the states usually follow the same practice as the fed and require an estimated payment at the time of filing or you’ll face penalties & interest. At the very least, you will be absolved of the “failure-to-file penalty” granted you file within the extension window.
How to File an Extension
There are several online services that will let you file for an extension for free. You should never pay to file for an extension. If a preparer requires a fee to file an extension make sure it will be treated as a deposit to your overall tax preparation fee before paying. If it’s not, consider seeking an alternative preparer or filing your own extension and hiring a preparer after you have done so to prepare your return.
Filing an extension requires basic information such as your name (and spouse’s name if married), address, social security number(s), and date(s) of birth. Some other general information may be required, especially if you are making an estimated payment with your extension. Although you have six months from the original deadline, once your extension is filed and approved, you should work diligently to prepare your return (or have it prepared) and file it as soon as possible. There is no need to wait until the extension deadline.
What if You Miss the Extended Deadline
If you miss the extended deadline then you will be in a tough spot, especially if you owe. You will be assessed penalties & interest all the way back to the original due date for any unpaid amounts. You would be better off filing and setting up a payment plan if you don’t have the resources to pay your bill immediately. Making an effort to rectify your tax bill is better than taking no action or ignoring your responsibility all together.
Are you going to be late to file this year? File an extension! Find a preparer that can help you or head over to the IRS website to access any of the online and desktop software vendors to do it yourself!