Tax Extension Pros and Cons

Many taxpayers share one common quality among them: procrastination. Hey, it’s not our fault if we have other things that consume our time, like our jobs, kids, significant others, etc. Unfortunately, filing income taxes is a lengthy and arduous process – one that’s not easily done in a few hours, especially when filing without an accountant or tax lawyer. So, we may put the matter off until the last possible moment and end up filing for an extension.

But are tax extensions all they’re cracked up to be? Let’s take a look at the pros and cons.

 

Tax extension pros

Who doesn’t want extra time to file their taxes? Filing a tax extension gives taxpayers an extra six months to get their paperwork in order and also provides for a calmer setting if having taxes filed by an accountant or tax attorney. There will be less of a wait time and agents are more likely to focus their undivided attention on your needs, since the majority of people will have already filed.

You also won’t have to worry about paying a penalty if you go over the April 15 deadline. Even if you are just a few hours late to file your return, you can be hit with a 5 percent penalty for every month that you are late in filing. By requesting an extension, you can avoid that penalty.

Plus – and best of all – tax extensions are free! You don’t have to pay anything for the extension whatsoever. All you have to do is complete IRS Form 4868, and you can sit back until the next deadline, Oct. 15.

But while the extension itself doesn’t cost you anything, that doesn’t mean you won’t have to pay later.

 

Tax extension cons

Here’s where the whole “paying later” part comes into play. If you file for a tax extension and end up owing money to the IRS, not only will you have to pay what you owe, but you’ll also be subject to six months’ worth of interest on that amount! In addition, you’ll also be subject to an extra 0.5 percent penalty fee for each month you didn’t submit your return. Though not quite as bad as the penalty for being late without an extension, you still end up paying.

Also, chances are that if you procrastinated in filing your taxes the first time around, you might do so once again. Postponing your tax return also means postponing your refund, if you expect to receive one. If you filed an extension, but are in need of the refund money, try to submit your paperwork as soon as possible. Not only will you avoid extra fees, but you’ll get your money back a lot faster.

 

So kids, the moral of the story? The IRS always wins. Whether you file an extension or not, there’s always a chance you’ll end up paying more money to the government than if you would have filed on time.

Luckily, if you did file an extension and are worried about what you may or may not owe in fees or penalties, you can always contact a tax lawyer in your area for assistance.