PRESS ENTERPRISE 4/16/2018 – Tax Tips: 7 Reasons to File an Extension

 

7 reason to file an extention

Tax Preparation and Deadline Extensions

Need some more time to get that 1040 filled out and signed?

An extension is your way of asking the Internal Revenue Service for that extra time, extending your filing due date to October 15. If you aren’t already utilizing tax preparation services, you need to file these extensions yourself.

You can obtain a tax extension for any reason. They are granted automatically by the IRS as long as you complete Form 4868 and submit it by April 17. Here are some reasons why you might want to file an extension.

Life events

Events in your life may be unexpected and can interfere with the filing of your tax returns. Sickness, death, births, divorces, unexpected job changes, and natural disasters all can stop you from focusing on your tax return.

Missing documents

The IRS has changed due dates of other returns such as 1099s, S-corps and partnerships in an attempt to get the documentation to the taxpayer in a more timely basis. However, the 1099s, S-corps and partnerships can also get automatic extensions.

Brokerage firms also may have issues in preparing their 1099s for clients. Often they don’t receive information in a timely manner to prepare their 1099s before sending them to the taxpayer.

More time to look at IRA conversions

An extension can give you extra time to review IRA conversions to a Roth IRA. If there has been a change in the market after you made the conversion, it might be a good decision to take some time to determine if you should “recharacterize” your Roth back to a regular IRA.

Retroactive tax law changes

Any tax law changes that happen after the April due date could affect your tax return. If there is an indication that one of these changes might affect your return, consider getting an extension to see what actually happens with that law. An extension might save you the time and effort to file an amended tax return after the law becomes effective.

Lower the chance of an audited

Some tax professionals believe that filing an extension will lower your chance of being audited by the IRS. The IRS tries to meet their audit targets by starting earlier in the year. This implies that if your return is filed later in the season you would have a better chance of not being audited.

Fund a retirement plan

If you are self-employed, you may want to fund a SEP-IRA, solo 401(k) or Simple-IRA plan. Filing an extension gives you an extra six months to fund these plans.

(Please contact your financial planner for more details.)

Preserves your tax refunds

If you don’t file your tax return by the extended due date, there is a three-year deadline for receiving a refund from the IRS. If you originally filed an extension, you get an additional six months to claim that refund.

Please note: While an extension gives you extra time to file your tax return, an extension does not give you extra time to pay your taxes. Your payments are still due by April 17.

The amount you pay with the extension should be at least 90 percent of your actual tax liability. This will protect you from a failure-to-pay penalty.

Individuals can file an extension easily.  They just need to fill out Form 4868 through the internet or mail it in to obtain an additional six months before they have to file.

By MARCIA CAMPBELL | Contributing columnist with THE PRESS ENTERPRISE
PUBLISHED: April 16, 2018

Marcia L. Campbell, has worked as a CPA for over 25 years specializing in seniors, trusts, estates, court accountings and probate litigation support.  You can reach her at Marcia@MCampbellCPA.com

6 Responses

  • It’s interesting to know that filing an extension will help you have extra six months on funding your retirement plan. I will share this tip with my mom now that she is almost at the age of 60. She should start getting her finances ready to ensure that she will have enough funds if ever she needs medical treatments someday.

  • It helped when you mentioned that an extension does not give you more time to pay your taxes while an addition gives you more time to file your tax return. A friend of mine mentioned to me last night that he is looking for reliable tax service for his business because he is having a hard time fixing it and asked how will he know if he is eligible to have them. Thanks to this informative article and I’ll be sure to tell him that it will be much better if he consults a trusted tax service as they can answer all his inquiries.

  • Thanks for the tip about filing an extension to get more time to look at IRA conversions. I’m thinking about hiring a tax preparer since I’m not 100% sure how to file my taxes efficiently. It’d be nice to work with a professional so I can be sure I’m doing everything right.

  • I like how you mentioned that it is important to compile your documents to prevent misunderstandigs. A friend of mine mentioned to me last night that he is looking for a reliable service that can help him with his apartment liability, and asked if I have any idea what is the best option to do. Thanks to this informative article and I’ll be sure to tell him that it will be much better if he consults a trusted real estate tax attorney as they can help them with his concerns.

  • I liked how this post pointed out that natural disasters can be a reason to file an extension. My friend is having a hard time in tax preparation. I think it’s best to work with a firm that offers tax services to ensure that his filing is all accurate.

Leave a Reply

Your email address will not be published.