Filing an extension might be good for you

Filing an extension might be good for you

The April 18th tax filing deadline is fast approaching. Instead of rushing to file your return by the first due date, you should consider the option to file for an automatic six month extension. There are many reasons an extension can be helpful or necessary.  Many taxpayers fear that extending their return will be a red flag for audits, but the truth is that millions are processed every year with no greater risk. In fact, there can actually be some important advantages for opting to extend the time to complete your returns. 

Going on extension allows time for reflection.  It gives additional time to consider reporting alternatives and to get professional advice. If there are complex issues on your return this year, it may pay to get a second opinion or attempt to gather more information or facts that might reduce your taxes on a particular transaction.

Extending may reduce the need for an amended return. Amended returns often are needed because people rush.  Although sometimes necessary, amended returns are much more likely to be scrutinized, especially if a sizeable refund is involved. File once correctly so you don't have to consider the consequences of amending.

Important tax documents are often not available before April 18th. Business owners or investors often are still waiting for K-1s or other documents beyond the first deadline. Even if this information is received right before the deadline, it may benefit the taxpayer to file for an extension to have time to reflect on the effect of that income or loss.

The extension is automatic. Once you file the form either by mail or electronically, it goes into effect. The Internal Revenue Service (IRS) does not have to approve it. 

Important! You are still required to pay any taxes due on April 18th. The extension is only for more time to prepare your return, not to pay your taxes.  The IRS will assess late payment penalties and interest charges which accumulate each month that your taxes go unpaid.

Going on extension is easy.  Ask your return preparer to handle it, or visit these sites below:

E-filing using commercial software, or do it yourself electronically https://apps.irs.gov/app/freeFile/jsp/index.jsp?ck

Form 4868, Application for Automatic Extension of Time

Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns

For additional information on filing an extension, visit https://www.irs.gov/Filing/Extension-of-Time-To-File-Your-Tax-Return.

Article by: Lorrie Eaton, Senior Tax Manager

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