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Here Are the Reasons Why You Should Extend Filing Taxes

Here Are the Reasons Why You Should Extend Filing Taxes

If you need extra time for tax filing preparation, the Internal Revenue Service will allow a for a six-month file extension. As long as you complete the proper form on time, the IRS grants them automatically and the taxpayer can obtain a tax extension. Some states accept IRS extension while a separate state extension form is required for others so you better check your state laws.

In the United States, April 15 or the next business day if it falls on a holiday or weekend has been considered as “Tax Day” since 1995. Many people still find themselves in a panic on April 14 to get their records together despite the fact that on the same day every year, taxes are essentially due.

Filing an Extension Benefits

By the April filing deadline, just submit Form 4868 electronically or on a paper. Filing a tax extension is free, easy and automatic. You will not only relieve the stress that that often accompanies trying to pull together during tax time but also you will gain six more months to file. You can ensure you’re taking advantage of all tax benefits available to you and you’ll be able to thoroughly review your return -- more time and less stress. 

You will avoid the 25% failure to file penalties of the tax due. You will be subject to this penalty if you file an extension but miss the extended deadline. Keep in mind that your payment is still due at the April deadline even if you file an extension since extension only gives you more time to file, not more time to pay.  

Retroactive changes to the tax law that might be made after the April deadline-- an extension will allow you to take advantage without the added time and expense of filing an amendment. IRS auditors must meet quotas and try to do so early in the year, some tax professionals theorize that filing an extension will decrease your odds of being audited. The earlier a return is filed, the longer it is in the system and will be most likely subject to review since the IRS does not disclose its process for selecting returns for audit. 

Information That Are Missing and Inaccurate

You can’t file an accurate return if what you have is incorrect or if you don’t have all the information you need. Some information returns like Schedule K-1 or Form 1099 arrive too late for you to complete your tax return by the April deadline. Extensions are frequently granted even if the IRS impose deadlines for filing information returns. Depending on the return, the extensions can be for 30 days or six months. 

To report interest, dividends, capital gains and sales proceeds, financial institutions and investment companies typically send 1099s to their customers. If they are based on information from multiple investments, these returns often need correction. Martin Cole, a tax educator, and former accountant said that sometimes if a company knows they are going to be correcting 1099s they will send a notice to let clients know a change is coming.

Going Out Of Town during Tax Season

Taxpayers who are out of town during the tax season can still get their return completed and filed on the April deadline using the electronic filing of income tax returns and the ability to obtain electronic copies of many tax forms. A tax-time vacation may compromise your ability to meet the filing deadline if you still need some paper information, however, or aren’t comfortable with electronic filing. 

The IRS offers some payment alternatives if you can’t pay your tax due instead of requesting an extension. You will still pay penalties and interest at a lower rate if you want to request a short extension to pay, of 60 to 120 days. For taxpayers who can’t pay their taxes when they are due, the IRS also offers an installment agreement. Until the tax is paid, you just have to pay a set of the amount per month. Paying your tax due with a credit card or loan is what the IRS suggest you should consider when paying. The interest on these accounts will be lower than the combined penalties and fee you will pay the IRS. 

Unifirst Financial & Tax Consultant
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