Tax Season: Should You File For An Extension?

If you’re swamped in paperwork trying to make the mad dash for the April 18 deadline to file your taxes, obtaining a six-month extension could go a long ways toward bringing you peace of mind. As with most things in life, there are pros and cons when it comes to tax filing extensions. In this article, we’ll discuss a few of each.

TAX EXTENSION AT A GLANCE

While many people file their returns well in advance of the deadline, there are many more who wait just until the final minutes of the day the returns are due. Even if you need another week to get all of your paperwork in order, filing an extension with the use of Form 4868 gives you another six months to sort things through.

PROS OF REQUESTING A TAX EXTENSION

It’s as easy as asking. You do not need to justify your request for an extension. Rather, you just need to make sure your request is made before the April 18 deadline and that Form 4868 is filled out correctly. It really is as simple as that. More likely that your tax returns will be accurate. Instead of rushing through your returns and filling out forms with incomplete and inaccurate information, an extension gives you plenty of time for making sure you have all of your paperwork together and for going over your returns more thoroughly. Protect yourself from an audit. There’s really no truth to the idea that filing for a tax extension makes you more vulnerable to an audit from the IRS. In fact, you’re actually at more risk of being audited if you hastily file a return that contains errors. Avoid penalties for late payment. If you miss the April 18 deadline without filing for an extension, you’ll be subject to the IRS’s failure to file penalty, which is about five (5) percent of taxes due for each month beyond the filing deadline. If you owe taxes, you’ll be hit with an additional penalty of about 0.5 percent of unpaid taxes per month.

CONS OF AN EXTENSION FOR TAX FILING

You still need to pay what you owe, even it’s based on guesswork. Whether or not you file for an extension, you are required to pay what is owed to Uncle Sam by April 18. Unfortunately, if you do not have time to properly vet your return, you may be basing what you owe on guesswork. That’s not a good thing when you consider that you’ll be charged with interest and penalties – even if you’ve filed for an extension – if you haven’t paid what you owe by April 18. You’re going to be waiting longer for your return. Many of us make our budgets with our tax returns figured in. Because you cannot receive your refund until you file your returns, you’ll most likely be waiting until the fall months for yours to arrive. You’ll miss deadlines to earn money. The deadlines to contribute to IRA’s and for married couples to switch from joint to separate returns are also April 18.

STATEWIDE BANKRUPTCY CAN HELP YOU

We know that – for a myriad of reasons – tax season can be a real headache for many Americans. For some, having to pay the IRS is next to impossible because of other debts. If you’re facing serious debt problems, there are options such as bankruptcy that could be your best choice. If we’re describing you, we encourage you to contact the offices of Statewide Bankruptcy at (602) 225-2222 for a free consultation.