Filing an Extension
Filing an extension is asking the IRS for additional time to file your tax return. It extends the due date of your taxes from April 15th until October 15th. In this article, we will go over when and when not to file an extension, who qualifies, the benefits of filing an extension, and how to pay taxes due.
Who Qualified to File an Extension
Anyone of any income level and filing status can file and extension. Businesses also qualify for filing an extension. Their due date gets pushed back from March 15th to September 15th.
Benefits and Reasons to File an Extension
The main benefit of filing an extension is that it helps you to avoid failure to file penalties. You may want to file an extension if you are missing information. Often people are missing Schedule K-1s and Form 1099s. Another reason is if your tax documents contain inaccurate information. For example, companies may use new 1099s with corrected information on them. You may also think about filing an extension if you are going to be out of town during tax season. This often applies to snowbirds who may be states away from their tax preparer.
When Not to File an Extension
You should never file an extension due to an inability to pay the taxes you owe. An extension only puts a delay on when your tax return is due, not when your taxes owed are due. This means you should estimate and pay off your balance by April 15th or set up a payment plan with the IRS. Failing to do so can result in penalties and interest racking up. Penalties are 0.5% of the unpaid balance per month. This comes with a cap of 25% of the unpaid tax. Interest is adjusted quarterly. There is 8% interest applied for the first two quarters of 2024. Interest compounds daily from the original due date the taxes were due until the funds are paid in full.
Rejection of Extension
Sometimes extensions are rejected. The reasons for rejection vary. But typically, it is due to minor mistakes like misspellings or switched numbers. Or out of date information like an address that doesn’t match IRS records. Once rejected the IRS will give you a five-day time frame in which you can fix your errors and refile.
Filing Your Extension
If you need to file an extension, be sure to contact your tax preparer by April 15th to accomplish this.
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