Filing for an extension on a tax return often gets a bad rap. Yes, in a perfect world, everyone’s tax returns would be filed timely and accurately by April 15. But we don’t live in a perfect world. The information necessary to complete returns comes in later and later each year and tax laws are constantly changing. In reality, an extension to October 15 can actually be very beneficial to both the taxpayer and their CPA.
Extending your tax return:
- Provides your accountant more time to prepare and complete the return accurately and with the best possible outcome. By taking the pressure off, you allow more time for meaningful dialogue with your accountant.
- Decreases the chances you’ll have to file an amended return. The various information needed to complete a return (Schedule K-1, corrected 1099s, etc.) are sometimes not available before the April 15 deadline. If a return is filed incomplete, an amended return is often required
- Saves you from penalties. A return filed on extension is better than trying to file a return late or incomplete. Note – The extension gives the taxpayer additional time to file, but not additional time to pay. Any anticipated taxes owed will need to be paid by April 15th.
- May qualify the taxpayer for additional retirement planning opportunities or additional time to fund certain types of retirement plans, such as a SEP. Please note that this is not true of IRAs, which are due by the original filing date.
- Does not increase the likelihood of being audited. This is a concern sometimes expressed by those who are unfamiliar with the extension process.
Talk with your tax advisor about the implications of filing your return on extension. An extension can be a beneficial choice in many circumstances. Contact us if you have any questions about how to file an extension or to determine if filing an extension is the right choice for you.