It’s the last minute. Is it okay to file an extension?
Every year, clients come to me with a common question as the tax deadline nears. “When should I file an extension?” While the question seems simple, many times the decision is much more complex than one would think. Let us take a look at some common reasons to file extensions and how those affect one’s tax return.
I’m just not ready!
Sometimes, clients just can’t get all of their tax information together in time for the usual tax deadline. April 15 may seem a long way from January 1, but sometimes things happen to eat that time away. I’ve had clients lose a loved one, suffer medical emergencies, not receive needed tax forms, and even (GASP!) just plain forget! Thankfully, the IRS provides an automatic six-month extension for taxpayers by filing Form 4868 by the current tax deadline (for example, April 18, 2022). Let us see what that extension means to you, the taxpayer.
I need an extension. Now what?
The process involved in filing an extension is fairly simple, yet the consequences for each taxpayer can range from nothing to huge penalties if not done correctly. A few things you need to keep in mind:
- A correctly filed extension helps avoid costly late filing fees. (Up to 25% of any unpaid taxes)
- The extension changes your due date for filing the return but DOES NOT extend the due date for tax payments. Often, we can help you estimate your tax amount so your taxes are paid in time, avoiding costly interest fees on late payments. (0.5% or 1.0% per month depending on your situation)
- Extensions allow your return to be completed as accurately as possible without the added stress of trying to complete your return “under the wire.” Whether filing your own return or filing with a tax preparer like us, there is more time to ensure your taxes are filed correctly and items are not missed.
- The IRS has options when you file an extension that can lower fees and interest, but these are not always automatic. Speak with a tax preparer to find the best options you may have when filing an extension to reduce your tax burden.
No matter what your situation is, you can rest assured we will do whatever we can to help. We want to protect you from any fees and/or penalties, and we will work with you to find the best solution. Contact us today to schedule a consultation!