Tax Extensions – What you need to know.
Obtaining a 6-month extension to file is relatively easy and there are legitimate reasons for doing so; however, there are also a few downsides.
WHAT IS AN EXTENSION OF TIME TO FILE? An extension of time to file is a formal way to request additional time from the IRS to file your tax return, which is due on April 15.
Taxpayers should be aware that an extension of time to file your return does not grant you any extension of time to pay your taxes.
WHAT ARE THE PROS AND CONS OF FILING AN EXTENSION?
Pros
You can avoid a late-filing penalty if you file an extension. The late filing penalty is equal to 5 percent per month on any tax due plus a late payment penalty of half a percent per month.
You can also avoid the failure to file penalty if you file an extension.
You are able to file a more accurate--and complete--tax return.
If your tax return is complicated then your tax preparer or accountant will have more time available to work on your return
If you are self-employed, you’ll have extra time to fund a retirement plan.
Filing an extension preserves your ability to receive a tax refund when you file past the extension due date. Filers have three years from the date of the original due date (e.g., April 15, 2019) to claim a tax refund.
Cons
If you are expecting a refund, you’ll have to wait longer than you would if you filed on time.
Extra time to file is not extra time to pay.
When you request an extension you will need to estimate your tax due for the year based on information available at the time you file the extension. If you disregard this, you may owe late filing penalties as well.
Dealing with your tax return won't be any easier 6 months from now.
If you have any further questions or need our assistance with obtaining an extension please feel free to contact us.