5 Important Things to Know About Filing a Tax Extension
With just a few weeks to go until Tax Day, you might be thinking about filing for an extension if you’re too stressed out to think about filing your taxes right now. Before you do, there are some important facts about filing for an extension that you need to be aware of.
1. An extension gives you six extra months to file, not to pay taxes if you owe them.
If you expect to owe taxes, interest and/or underpayment penalties will still rack up until you begin making payments. Filing for an extension only relieves you from the penalty for failing to file a tax return by Tax Day. The failure-to-file penalty will apply again if you don’t file a return by the extension date (October 17, 2017 for most individuals.)
2. It’s not prudent to file for an extension unless you have a good reason for doing so.
Most people believe the misconception that you will gain more time to pay your taxes by filing for an extension. If you are experiencing difficulties that prevent you from having all of your documentation ready to file by April 18 such as being out of the country, a death in your family, medical hardship, or missing tax forms that may not arrive in time.
If you owe taxes, it will only exacerbate your tax debt and the IRS doesn’t pay interest for holding your tax refund for longer.
3. Your state(s) may require an additional extension request.
Not all states have reciprocity with filing an extension request at the federal level so you may need to file an additional extension, which can cause a major bottleneck if you have multi-state tax issues. State tax policy also may not mirror federal policy and give you less time to file an extension or even have steeper penalties and interest associated with unpaid taxes that were due by the filing date.
5. An extension may be a better alternative to filing an amended tax return in some situations.
If there are retroactive tax law changes or you realized you qualified for a tax benefit but wouldn’t have claimed it if you just filed, filing for an extension is a cheaper and less stressful option than filing an amended tax return in some situations.
Tax Law Experts in Virginia
Rue & Associates is available year-round for your tax preparation needs, and we can help you determine if an extension is helpful in your case or not. Give us a call to speak to one of our friendly and professional tax law experts today.