Better to file an extension than incorrect return
If you don’t know the amount of stimulus or advance child tax credit that you received, it’s better to file an extension than a tax return with the wrong numbers.
Filing a return with incorrect amounts of stimulus or advance child tax credits could delay your refund for months.
The IRS will not fine or penalize you for filing an extension.
Many people think that filing the extension will anger the IRS or cause an audit. This simply isn’t true. In fact, there was a time when filing an extension reduced your chances of being audited. Many people who knew this would always file an extension just to reduce their odds of being audited. However, filing an extension no longer reduces the chance of being audited.
You may get better service from your tax professional after the April 18 deadline. Tax professionals are normally much less busy after the deadline and won’t be as rushed to get tax returns finished.
Filing an extension is quick and easy. There are several options for filing an extension.
You can go to the IRS website and use Free File to e-file an extension regardless of your income. You can also print the form and mail it.
You can also get an extension by paying all or part of your estimated income tax due and indicate that the payment is for an extension using Direct Pay which is the IRS electronic payment system. You can also use a credit or debit card. Doing it this way you won’t require you to file a separate extension form and you will receive a confirmation number for your records.
If you use a tax professional, you can ask them to file an extension for you.
Filing an extension does not postpone your tax liability. If you owe the IRS, you are required to pay at least 90% by the deadline. Otherwise, you will pay late-payment penalties and interest on any unpaid amount.
If you don’t file an extension by the deadline, the IRS can charge a 5% failure-to-file penalty each month your return is late. The maximum penalty is 25% of the amount due. Failing to file an extension is a much larger penalty than the penalty for not paying the IRS on time.
I’ve seen people who were panicked about the deadline when they were getting a large refund. They didn’t realize that there is no penalty for filing late if you don’t owe. However, if you file longer than three years after the deadline, the IRS isn’t normally required to give you your refund.
People who overlook the deadline and fail to file an extension should file as soon as possible.
If you are penalized for filing late, your tax professional may be able to easily get your penalties abated.
David Zubler is a tax accountant and Enrolled Agent representing clients before the IRS with over 25 years of tax experience. He is the author of four tax books and is the founder and president of Your Tax Care. The company provides business and tax education to the public at its website, YourTaxCare.com. David can also be contacted by email at email@example.com