Are you filing for an extension? Has time run out to meet the April 15th initial deadline? It’s OK. Really, it is. For some reason, taxpayers get very worried if they, or their preparer, need to file for an extension for any reason. The reason could be valid: you are still missing a K-1 from a company you own, or waiting on a corrected W-2 or 1099 you know you are getting. Or it could be your preparer ran out of time, or you submitted your tax information late. Or maybe, you just plain didn’t get around to doing it yet.
It’s OK to file for an extension. You should pay an estimate of what you think you’ll owe by April 15th to avoid or minimize penalties, but the simple act of filing for an extension to allow for an additional few days or few months to file should not cause a lot of stress and consternation. The IRS automatically accepts your extension request. They don’t even ask for a reason. Honestly I’m not sure why they don’t just make the filing deadline October 15th, but I guess they have to get people going somehow. Otherwise everyone would wait until September and October to file.
This is a link to an AICPA guide to frequently asked questions about extensions. It reviews several of the concerns and questions people have about extensions. Here are a couple of myths I hear circulating about extensions.
The IRS charges a fee: FALSE. I have heard this many times and even heard that “the IRS charges $75 to extend your return”. This is not true. Your CPA may charge a fee of you brought in your information late and they need to do a special calculation to find out how much you should pay, but the IRS does not charge a fee.
It increases your chances of getting audited: FALSE. There is no evidence this is true. In fact I’ve heard others claim your audit chances are smaller, but that is is speculation. I can say that of all the IRS audits I have ever seen or heard about, not one was the result of extending your return. In fact, I have personally extended my personal and business returns for a very long time with no repercussions.
My return won’t get filed until October: FALSE. If your CPA or tax preparer is extending your return, it may mean only a week or two delay in getting your return completed. I’ve had clients tell me when their preparer extended them it meant an additional 6 month wait. This should not be the case; the extension allows for 6 months additional time but it doesn’t mean you have to take all 6 months to get the return filed.
So, if you need to file for an extension, don’t worry about it. If your preparer is extending your return, it may mean an additional week or two. But that’s not a bad thing: it allows your preparer to work on your return in a more sane atmosphere, spend more time on your return and possibly make it more accurate or find ways to lower your tax bill.