Filing a Tax Extension: Is That a Good Idea?
Peter Suciu
Taxes, Americas
For those who know they owe money, a better solution is to file and set up a payment plan, make an “offer in compromise” or even request a temporary collection delay.
Sometimes you just can't meet deadlines, including the one for the federal income tax. While the Internal Revenue Service (IRS) has already extended the normal deadline from April 15 to May 17, some people will still need a bit more time. This year you can file for an extension request using IRS Form 4868, which gives you additional time to file your personal tax return.
There are several pros and cons to consider.
In most cases, the extension request will be honored automatically and you don't even have to explain a reason with the IRS for why you need an extension. Instead, just fill out the form—but be sure to double-check important details such as Social Security number and other data. It is erroneous information that results in the rare extension rejection.
By filing for an extension you'll have until Oct. 15 to file your return. This will give those who have been unable to prepare their tax return a little extra breathing room. When it comes to taxes it is always better to be correct and accurate than early.
So if you've suffered an illness, been in an accident or had to deal with lost records from a computer crash it can be best to file an extension to reduce the need to rush. You can also avoid any late filing fees by filing an extension. Victims of some winter storms in the south have already had their filings extended—and that includes residents in Alabama, Kentucky, Louisiana, Oklahoma and Texas.
However, the extra time doesn't always work for some people and just causes more time to stress, and if you're waiting for a return, it won't come until after you file. If you need the money, then you need to file as soon as you can.
Likewise, if you know that you owe, filing an extension is certainly not going to make the problem go away and even delaying it won't help the situation. The extension is only for filing your tax return, not for paying the taxes you owe. If you fail to pay by the original deadline, the IRS will charge you interest on the unpaid balance and can even add-on penalties for paying late.
For those who know they owe money, a better solution is to file and set up a payment plan, make an “offer in compromise” or even request a temporary collection delay.
“An extension of time to file your return does not grant you any extension of time to pay your taxes, according to the IRS. “You should estimate and pay any owed taxes by your regular deadline to help avoid possible penalties. You must file your extension request no later than the regular due date of your return.”
However, the IRS has provided a “Free File” to electronically request an automatic tax-filing extension, which gives you until Oct. 15 to file a return. To receive the extension, you will need to estimate your tax liability on the form and also pay any amount due.
Peter Suciu is a Michigan-based writer who has contributed to more than four dozen magazines, newspapers and websites. He regularly writes about military small arms, and is the author of several books on military headgear including A Gallery of Military Headdress, which is available on Amazon.com.
Image: Reuters