Steps to Filing a Tax Extension

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Steps to Filing a Tax Extension

Is Filing an Extension Bad?

 

We get this question probably a thousand times a year. An extension is not inherently bad, it is truly personal preference. An extension will not increase your risk for an audit or red flag your return with the IRS. In fact, it is called an “automatic extension”, because the IRS approves anyone for an extension that requests one. There are quite a few benefits to filing an extension! It is a legal way to get more time to file your tax return. However, it’s important to understand that it does not extend the time to pay any taxes owed.

 

Deadline to File Extended Taxes

  • Individuals (Form 1040): The regular deadline is April 15. With an extension, the deadline is October 15.
  • C Corporations (Form 1120): The regular deadline is April 15 for corporations on a calendar year. With an extension, the deadline is October 15.
  • S Corporations (Form 1120S) and Partnerships (Form 1065): The regular deadline is March 15. With an extension, the deadline is September 15.
  • Texas Franchise: Generally, the due date is May 15 for franchise taxes. With an extension, it is typically extended to November 15.

For other entities, the extended deadline varies based on the type of entity and its fiscal year-end. There is no “second” extension. So once you extend, there is no additional amount of time past the October 15th deadline for Individuals and C Corps or September 15th for Partnerships and S Corps.

 

Why Would I Want To File an Extension?

One of the most common reasons people request to file an extension is that they are not yet ready or organized to prepare their return. For a business owner, they may need more time to ensure their books are in good order and for individuals, it may just mean that they are waiting on additional tax forms or just don’t want to file yet. In some cases, we see extensions because they want to avoid the hustle and bustle of tax season and get more quality time with us, their tax preparer!

 

Do I Need to Pay Taxes If I File an Extension?

Yes, you are required to pay any estimated taxes owed by the original filing deadline. An extension to file does not grant an extension to pay, just additional time to file. Failure to pay taxes owed by the original deadline may result in interest and penalties.

 

Reasons for Filing Tax Extension

  • Additional Time to Gather Information: If you need more time to collect necessary documents or information.
  • Complex Tax Situations: More time to navigate complex tax situations or consult with a tax professional.
  • Unexpected Life Events: Personal emergencies or life events that prevent timely filing.

Pros and Cons of Filing an Extension

Pros:

  • Avoid Late Filing Penalties: Extending gives you more time to file without incurring penalties.
  • Extra Time for Accuracy: More time to ensure the tax return is accurate and complete.
  • Flexibility: Provides flexibility in managing cash flow if taxes are owed.

Cons:

  • Interest and Penalties on Unpaid Taxes: Interest accrues on any unpaid taxes from the original due date, and there may be penalties for late payment.
  • Delayed Refunds: If you are due a refund, filing an extension delays receiving it.

 

Does Filing an Extension Cause an Audit?

Filing an extension does not increase the likelihood of an audit. Audits are typically triggered by inconsistencies or errors in the tax return, not by filing an extension.

 

Steps to Filing a Tax Extension

At Molen & Associates, we file extensions at no cost to our clients, so feel free to skip the rest of this post! However, if you are still interested, please continue reading.

  1. Determine Eligibility: Verify that you are eligible to file for an extension. Most taxpayers are eligible, including individuals, corporations, and partnerships.
  2. Complete the Appropriate Form:
    • For individuals, file Form 4868, “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.”
    • For businesses, including C corporations, file Form 7004, “Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.”
  3. Estimate Taxes Owed: Calculate an estimate of any taxes owed and make a payment. Filing an extension extends the time to file, not the time to pay.
  4. Submit the Form: File the form electronically through the IRS e-file system or mail it to the appropriate address listed in the form instructions before the due date.
  5. Receive Confirmation: If filed electronically, you will receive an electronic acknowledgment.

 

Sources:

https://www.irs.gov/newsroom/extension-filers-irsgov-should-be-first-step-for-summertime-tax-help-agency-encourages-those-with-extensions-to-file-soon

https://www.irs.gov/newsroom/extension-filers-irsgov-should-be-first-step-for-summertime-tax-help-agency-encourages-those-with-extensions-to-file-soon

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