Are you unprepared for this tax season? If the filing deadline approaches and you haven't begun your forms yet, you may be considering filing a tax extension. While requesting an income tax extension can offer a few advantages, it may also carry a few drawbacks. Here are a few things to know before filing a tax extension.
1) There is No Charge to File an Extension
The IRS does not charge a fee for requesting an income tax extension. Instead, you simply need to complete and submit Form 4868. The IRS does require that you state the reason why you are requesting the extension on the form. However, in most cases, extensions are approved fairly easily.
2) You May Still Have to Pay a Tax Penalty
Requesting a tax extension by the tax filing deadline can help you avoid a late-filing penalty, but you may still wind up owing the IRS more money. If you owe a balance to the IRS, your balance is still considered "due" on April 15, even if your return doesn't have to be filed until October 15. Each month that your balance goes unpaid, you'll accrue interest on it until it is paid in full.
3) The Six-Month Window Can Go by Quickly
Receiving an additional six months to submit your tax return can feel like a huge relief, particularly if you have to sort through a lot of paperwork to complete your taxes. However, those six months can go by very quickly, and you can easily find yourself scrambling to meet the extended filing deadline of October 15. To avoid any last-minute rushing, begin working on your return as soon as your extension is approved.
4) Your Refund Will Take Longer to Arrive
If you request an extension and you're owed a refund, you won't receive it until you file your return. It's always a good idea to work through your return first and find out if you're entitled to receive a refund. If you are, it may be worth your time to put in the extra work to get your return done now. The sooner you file, the sooner you'll get your refund.
If you decide to request a tax extension, keep in mind that you don't have to pay a filing fee. However, you might have to pay interest on a balance due or wait longer to receive your refund. You'll also need to use your time wisely to avoid rushing as the extended deadline approaches. If you remember these pointers about filing a tax extension, you can decide if requesting one is a good idea for your financial situation.
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