Coupled with legitimate reasons for doing so, getting an extension to file your taxes is relatively easy; however, there are points to consider regarding the process. Hers what you need to know about filing an extension, if you happen to need more time to file your taxes.
What is an Extension of Time to File?
An extension of time to file your tax return allows individuals more time from the IRS to wrap up their returns, due on April 15, 2019 (unless you live in Maine or Massachusetts, where you can file by April 17). You can request more time, without having to explain why you’re asking for more time.
Note: Special rules may apply if you serve in a combat zone, or a qualified hazardous duty area or living outside the United States. Let us know if you need clarifying information.
Individuals are given six more months to file their returns. In 2019, the extended due date is October 15. Businesses can also request an extension, with the deadline for S-corporations and Partnerships being September 16, while is October 15 for C-corporations, respectively.
Caution: Taxpayers need to know an extension to file returns does not grant you an extension to pay taxes due. In 2019, April 15 is the deadline to pay taxes owed and avoid penalty and interest charges.
What Are the Pros to Filing an Extension?
- Wave the late-filing penalty if you file an extension; this is equal to 5% per month on any tax due, plus, a late payment penalty of half a percent per month.
Note: If you are due a refund and file late, you wot be penalized for filing late.
- Avoid the failure to file penalty. If you file more than 60 days after the due date (or extended due date), the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not pay a late-filing or late-payment penalty, if you can show reasonable cause for not filing or paying on time.
- Filing a more accurate–and complete–tax return. Rather than rushing to prepare your return (and possibly making mistakes), you gain six more months to gather required records, especially if you are still waiting for tax documents not having arrived; or needing more time to organize your tax documents supporting deductions.
- Your tax preparer or accountant will have more time available to work on your return. If your tax return is complicated, he or she can help you leverage every tax credit and deduction entitled to under the current tax code.
- Additional time for building up retirement savings. For the self-employed: Individual 401(k) and SIMPLE plans must have been set up during the tax year for which you are filing. It is, however, possible to fund the plan – as late as the extended due date for your prior year tax return. SEP IRA plans may be opened and funded for the previous year by the extended deadline, as long as you file an extension.
- Retain the ability to receive a tax refund when filing past the extension due date. You have three years from the expected due date (e.g., April 15, 2019) to claim your tax refund. However, if you happen to file an extension, you have six more months to claim your refund – extending the statute of limitations for refunds in the process.
What Are the Cons to Filing an Extension?
- Receiving a refund will take longer than you would if you filed on time.
- Extra time granted to file doest mean extra time to pay. If you don’t pay a least 98 percent of taxes due now, you will be liable for late-payment penalties and interest, which equate to one-half of one percent for each month, or part of a month, up to a maximum of 25% of the amount of unpaid tax remaining from the due date of the return until the tax is paid in full. If you cannot pay, the IRS can give you payment options.
- Requesting an extension requires estimation of your taxes due for the year – based on information available at the time you file the extension. Disregarding this can render your extension being denied. If you did file your extension at the last minute assuming it would be approved (but wast), you possibly incur late filing penalties as well.
- Your tax return filing wot be any easier, six months from now. You still need to gather your receipts, bank records, retirement statements and other tax documents–and file a return.
If you do need more time to prepare your federal tax return, you may benefit from filing a tax extension to file. If you have any questions; or are wondering if you need an extension of time to file your tax return, let your experts know!