This year’s tax-filing deadline is Tuesday, April 17. Don’t procrastinate. If you feel as if you need more time to file your tax return, filing an extension may be your best option. Taxpayers needing more time can get an automatic six-month extension from the IRS. Being granted an extra six months to file sounds great, there are also downsides to consider. Plus, if you wait until the last minute, and your extension request has been denied you may be hit with certain penalties. If you need more time to file your tax return this year, here’s what you need to know about filing an extension.
How Extensions Work?
An extension of time to file is a formal way to request additional time from the IRS to file your tax return. You will need to answer a few questions on Form 4868. However, an extension of time to file your return does not grant you any extension of time to pay your taxes. Some advantages of filing an extension include avoiding a late-filing penalty with 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. If you file your return more than 60 days after the due date (or extended due date), the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. The extra six months of time can allow you to file a more accurate tax return. And with an extension, you are still able to receive a tax refund when you file past the extension due date.
The downside of filing an extension is you will have to wait longer for a refund than if you would have filed on time. If you don’t pay a least 90 percent of the tax due now, you will be liable for late-payment penalties and interest. The IRS does provide many options for payment. Our CPAs can help you understand the best option for your needs. Also, when you request an extension, you will need to estimate your tax due for the year based on information you currently have available.
Don’t wait until Tax Day-eve to decide if you need an extension. If you have questions on what’s the best option for your situation, give our office a call right away!