Benefits and Downfalls of Filing for a Tax Extension

filing for tax extensionDid you know that you can request a tax filing extension from the IRS? Well, you certainly can.

Tax extensions are not just for people that have waited to file at the last minute either. There are several reasons why filing for a tax extension would be beneficial for anyone. Filing an extension is free, very easy to obtain, and the IRS will allow you up to 6 months to complete your taxes.

By accurately completing the IRS Tax Form 4868 (for personal tax returns) or IRS Tax Form 7004 (for business tax returns) you will be able to successfully file for your tax extension. You can apply for any reason at all and the IRS may automatically grant it to you.

Why Filing for a Tax Extension Can Benefit You

Sending a request for a tax filing extension can have many benefits. Here are some reasons you might want to consider applying for a tax extension this year:

Give Yourself Extra Time to Make Your Tax Filing Perfect

After the start of the New Year, tax season begins, and it can feel like everyone is rushing to file their taxes by the deadline. Getting an extension can not only relieve you of the stress to file in time, but it can also allow you to take your time getting your documents in order. You also get a chance to work with your accountant at a time when they can focus more on you and your needs as opposed to handling hundreds clients, and trying to finish all taxes by a deadline. This is a great option for people that are self-employed.

Avoid the Hectic Tax Season

Having more time to file can improve the accuracy of your return. Accountants and taxpayers are both extremely busy during tax season, and it is possible for mistakes to be made. During the tax season rush, many accountants will be overwhelmed and may miss important deductions that could save you money. Filing for an extension can help you avoid the mad rush and will allow you to take your time and make sure your taxes are filed correctly.

Save Money

Most accountants maintain higher prices during tax season and hike up their prices even more on the week of the deadline. They tend to lower their prices significantly in the late spring and summer time. Filing your taxes with an accountant at that time could cost you much less. Having a tax extension also provides you additional time to make various elections on your tax return, as well as preserve your tax refunds if you file after the extended deadline.

Why You Shouldn’t File for a Tax Return

Although requesting a filing extension for some people may be a benefit, for others an extension may not actually be an option. Make sure if you are attempting to file an extension that you are aware of any downfalls.

Extra Time to File Doesn’t Mean Extra Time to Pay

An extension will provide you with additional filing time, but if you owe taxes, it is still due by the original deadline. Although an extension can help reduce penalties and help you find more deductions, any outstanding balance will still be charged with a late payment penalty (0.5% per month) and interest (right now at 3% annually).

An Extension Won’t Give Married Couples Extra Time to Switch from Joint to Separate Returns

Married taxpayers who filed jointly by the April deadline can, if they wish, amend their tax filing status to married-filing-separately. But, this status must be amended by the standard filing date.

Some People Aren’t Eligible for Extensions

Some taxpayers who requested an “Offer in Compromise” during previous filing periods must file by the April deadline during their five-year probationary period. Failure to file by the April deadline can result in the IRS revoking the offer and re-instate the original amount that was owed.

Contact an Experienced Raleigh Accountant about Tax Filing

The firm of C.E. Thorn, CPA, PLLC has provided the Raleigh area businesses with tax support for more than 28 years. Our team of accounting professionals are here to support you and your business throughout the fiscal year. If you are interested in requesting a tax extension, our office is available for a consultation.

Call our office at 919-420-0092 or complete the online contact form for support.