subject: The Truth About Extensions [print this page] The Truth About Extensions The Truth About Extensions
Tax Return Extensions are one of the most abused and misunderstood concepts within the tax code. Today, I will dispel two of the biggest myths surrounding extensions. Have any other questions about extensions that are not covered in this article? Post your questions to the comments section and I will be sure to answer them!
Extensions Do Not Grant You Additional Time to Pay Your Tax
1) Tax Return Extensions only grant you additional time to file your tax return, they do not give you additional time to pay your taxes. Your taxes are due on or before April 15th regardless of whether you have filed an extension.
2) Extensions are for people who legitimately cannot file a complete and accurate tax return by April 15th. Some examples of not being able to file on time include:
a) Waiting for a piece of information necessary to complete your return
b) Pending lawsuit that needs to be settled in order to determine the taxability of a certain item or items
c) Waiting until you are able to fund a qualified retirement plan
3) Extensions are not for people who do not have enough money to pay their taxes on time. Anyone in this situation is looking for a payment plan, not an extension.
4) If your taxes are not paid in full on or before April 15th, your extension becomes invalid and your filing is simply considered late.
Extensions Increase Your Audit Risk
1) When you file during the peak of tax season (February 15th through April 15th), your tax return is most likely being processed by a temporary worker who is being pressured to process as many tax returns as possible as quickly as possible
2) When you file during any other time of the year, your tax return is most likely being processed by a full-time, permanent worker who is an expert in detecting questionable items and who is no longer being pressured to process as many tax returns as possible.
If you are considering filing an extension, make sure you have a valid reason why and make sure that you get your taxes paid in full on or before April 15th! And always remember, whether or not to file an extension should ALWAYS be your choice...do not let your accountant or tax preparer put you on extension simply because they "do not have the time" to prepare it prior to April 15th!
Michael T. Hanley, CPA is the Managing Partner of the Long Island, NY CPA Firm, Merl & Hanley, LLP and the author of Effective Tax Planning for the MicroBusiness and Choosing the Right Structure for Your Business.
Visit MichaelTHanley.com for Tax Saving Tips, Marketing Tips & General Business Advice.
