A tax extension is simply an automatic extension of 6 months to send in your tax filing forms to the IRS. It is only an extension of filing the return--not an extension of paying your taxes. There are several good reasons to file an extension, and a few reasons why it may not be the right choice for you. To help you decide if filing an extension will benefit you, we have compiled the following list of tax extension pros and cons.
Advantages:
More time.
Tax extensions do indeed give you extra time - 6 months - to be exact. Many people decide to file an extension because they know they will not be able to properly prepare their return before the deadline. In this instance, filing for an extension is well worth it, because there are certainly tax mistakes that can be costly when made. It's always better to file an extension then an incorrect return.
May help prevent an audit.
Although many people assume any small mistake will result in an audit, with tax extensions it is not the case. Filing a tax extension will not increase your chance of being randomly selected for an audit.
No penalty.
You will not be fined, cited, or penalized for filing a tax extension. The IRS gives the public this extra inch in hopes that they will be more likely to get their money with less paperwork to worry about.
Stress relief.
In this economy, there is plenty of stress and worry to go around. Since there is no penalty for filing an extension, you may file one just to take some anxiety off of your shoulders. These days we can take all the stress relief we can get, and if you think filing an extension helps you focus on bigger problems, use that advantage.
No rushing to get your return in.
The worst thing you can do is rush your return. By rushing your return, you will either fudge the numbers or miss out on claiming deductions or credits you were eligible to claim. So, if it is nearing the deadline, and you know you do not have time to do it right, file an extension.
Disadvantages:
You still need to pay.
Although filing an extension will give you more time to file your return, it does not give you more time to pay the IRS if you owe them money. It is a costly but common misconception that filing an extension allows you to postpone tax payments as well. If you owe money to the IRS, then be sure to send in a payment when you file your extension. You must pay 90% of the amount you owe in taxes by April 15 or be subject to a late payment penalty. Notwithstanding that payment, you will be subject to interest on whatever is owed if not paid by April 15.
E-filing no longer and option.
One major inconvenience to filing for a tax extension is that it will prohibit you from being able to file electronically past the deadline. After April 15 has past, you will be required to send in your tax forms through regular 'snail' mail. This may seem scary to those of us used to doing everything online, but is really not as intimidating as it sounds.
IRS does not always notify you.
When you send in your return forms, the IRS will notify you that they have received them. However, the IRS will likely not notify you when they receive your extension. If you do file one, then it is a good idea to call the IRS and verify they received it. Also, for your benefit always make and keep a photocopy of any tax documents you send out.
Delaying the inevitable.
Hey, you might be getting some stress relief in April, but the stress will rear its ugly head again sometime between now and October. So, you had better find some time to get prepared.
You really still need to pay!
There is a reason this on here twice--people fail to pay-up when filing for an extension and it ends up costing them thousands of extra dollars in interest and penalties. Remember that no matter the reason you file for an extension, it does not extend your obligation to pay your taxes by April 15. If you do not know how much to pay, look to last year's return for some guidance.
Author: Roni Deutch
About the author:
The Tax Lady Roni Deutch and her law firm Roni Lynn Deutch, A Professional Tax Corporation have been helping taxpayers across the nation find IRS tax relief for over seventeen years. The firm has experienced IRS tax attorney who will fight the IRS on your behalf.
Article source: Free Taxes Articles.
