Extension of Time to File

Peter VanderWoude, MS, CPA, CGMA

April 1, 2018

Ever not have enough time to file your tax return by April 15th? Perhaps some of your tax source documents were only recently received. Perhaps “life” happened and you are not able to file your taxes on time. Sometimes life happens to your tax professional, too!

What do you do? The answer is easy. You file an Application for Automatic Extension of Time to File U.S. Individual Income Tax Return on Form 4868 by the filing deadline on April 17, 2018. This automatic extension gives you up to six months or October 15 to file your completed income tax return. Is there any detriment to filing an extension? No, but just be sure to pay any income taxes that you would owe on the completed tax return with your extension. The IRS wants its money!

But what if you don’t know what you owe? Fair question. Just work with your tax professional to estimate the tax owed and pay that in with your extension. If you regularly make estimated tax payments four times a year, you might consider putting the April 15, 2018 estimated tax payment for 2018 tax year in with your extension for 2017. Once your tax return is complete, your tax preparer can apply any 2017 refund to 2018’s estimated payments. This just gives you some more cushion.

A few clients each year comment, “I don’t have the funds to pay what I owe. Let’s file an extension.” Well, an extension of time to file is not an extension of time to pay. If you don’t have the funds to pay what you owe, file your completed tax return and pay what you can. If you need an installment agreement with the IRS, you can apply for one on their website. Yes, you will incur interest expense and pay a late payment penalty, but you will avoid a late filing penalty. Refer to my November 2017 article on tax penalties in What’s HOT archives or go to my blog on the EquusCPA.com website.

Business tax returns can be extended for six months as well. Once you file an extension and pay any taxes owed, the immediate pressure you felt is off. Guess what happens? Spring and summer arrives in the Finger Lakes and who wants to work on taxes? Don’t laugh, tax professionals feel the same way! Before we know it, the September 15 and October 15 extension deadlines are just ahead. This time we cannot get another extension of time to file.

Recommendation: if you have your tax source documents ready around April 15, then even if you need to file an extension just keep going and get the tax return completed. If you do wait until six months later, just make sure you get started early enough so a complete and accurate tax return can be filed. Your tax professional will thank you!

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