Is Filing a Tax Extension Right for You?

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Flower Mound Accounting: Last Minute Tax Tips

The tax deadline is just around the corner. Maybe you’re overwhelmed at work or you misplaced the W-2 that your employer sent you weeks ago. Whatever the reason, it looks like you might not make the looming April 18 due date and filing a tax extension may be the right thing for you.

It’s alright! The good news is that the IRS has an easy way for you to extend your tax deadline by six months by filing a Form 4868. Also, they don’t really care what your reason is as long as you file for an extension by April 18. (For Maine and Massachusetts residents, it’s April 19.)

tax extension

For some people, it just makes sense to file a tax extension.

Unfortunately, you still have to pay your taxes by April 18 by estimating what you owe. Use a tax estimator from one of the tax software programs or visit a trusted CPA to find out the amount. Remember: If you don’t pay on time, you’ll be charged late penalties and interest.

If you can’t pay your taxes, you can always request a 60- to 120-day extension to pay. You will still be charged penalties and interest but at a lower rate. The IRS also offers installment agreements that allow set payments each month.

Filing for an extension not only gives you until October to finish up your taxes, but it also helps you avoid failure-to-file penalties, which can add up to a quarter of your due taxes! If any retroactive tax changes occur after April, then you will be able to use them without having to change your already-filed taxes.

Here are a couple of reasons why an extension might be the right thing for you:

Missing information. Maybe you just can’t find all the correct forms to fill out an accurate tax return. Or, maybe you haven’t gotten all the forms. Forms like the Schedule K-1 or Form 1099 often arrive late because the companies that filed them had requested their own filing extension.

Incorrect forms. It isn’t too unusual for companies to make a mistake when sending out 1099s that report interest, capital gains, sale proceeds and dividends. They may even send you a notice that a corrected 1099 is on its way. If so, wait until you get it before filing your return.

Snowbirds. Seniors who spend the colder months away from their primary residences may also receive necessary forms ‘too late to file’ by April 18. If that’s not until April or later, these taxpayers may want to file an extension rather than rush their tax returns.

Major life event. If you’re going through a tough time, such as a divorce, a family member’s death, a job loss or major medical issue, doing your taxes may not be your top priority. File for an extension and do your taxes when things get a little easier. 

Busy tax pro. If you depend on a tax professional to file your return, you may find that they are too busy at this point in the year. Instead, have your pro handle the return after the stress lifts a little. 

Procrastinating
If you’re someone who hasn’t gotten your paper together and probably won’t before the deadline—you know who you are—request an extension. That way, you can delay your tax return all-nighter until October.

Who doesn’t need to request an extension
Those who live and work abroad, including military members on duty outside the U.S., automatically have an extra two months to file. Servicemen and others serving in combat zones typically have 180 days after they leave the combat zone to file returns and pay due taxes. Taxpayers affected by tornadoes, floods, hurricanes and other natural disasters may be eligible for an automatic extension as well.

Williams and Kunkel, CPA, LLP, CPAs can help you with filing an extension or any other tax needs you might have. Call us today in Flower Mound at 972-446-1040.

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Source: The Fiscal Times

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