You might not have a choice.
Having extra time to finish your return is often necessary if you’re still waiting for tax documents to arrive in the mail or if you need additional time to organize your bookkeeping.
However, filing for an extension involves both pros and cons.
- Reduce late penalties. You’ll avoid the 5% per month late-filing penalty if you file for an extension, then file your return by the extended deadline, which is October 16, 2023, for 2022 tax returns.
- Preserve your tax refund. The refund statute of limitations is also extended by six months when you file for an extension, which can preserve the ability for taxpayers to receive their federal tax refunds, even if they’re behind with submitting their tax returns.
- Fund a self-employed retirement plan. Self-employed people might want to fund SEP IRAs, solo 401(k)s, or SIMPLE IRA plans for themselves. Filing for an extension gives these taxpayers six additional months to do so.
- Take extra time to make elections. A wide variety of decisions must be made when preparing your tax return. Filing an extension gives you additional time to mull it over or to seek help.
- Improve the accuracy of your return. An extension gives you or your accountant extra time to review your return to ensure everything is complete and accurate before you send it in.
- You won’t gain extra time to fund an IRA. Traditional IRA and Roth IRA contributions are still due by the original tax deadline. You only gain additional time if you are contributing to a SEP-IRA.
- You can’t switch from married filing jointly to separately after the deadline. Married taxpayers who file jointly before the April deadline still only have until April 15 (unless you are subject to a disaster relief exception) to amend their tax returns to switch to the married-filing-separately status.
- You might confuse the IRS. The agency will expect you to file a return, even if you later realize you don’t meet the income requirements.
- An extension gives you more time to file, but it DOES NOT give you more time to pay.
- Most extension requests will be honored automatically once filed.
- You don’t have to explain to the IRS why you need the extension; simply file the form.
Need help filing an extension? Schedule a call with us today.
Hoping you have a great week ahead,
Today, it takes more brains and effort to make out the income-tax form than it does to make the income. – Alfred E. Neuman