Why would you need a filing extension?
The truth is there are a number of good reasons why you may want to file for an extension:
1. Obtaining an extension might reduce your tax liability.
Extending your income tax deadline to October 15 will give you that extra time to focus on tracking down additional deductions, etc; That may result in extra tax savings in your pocket.
2. Avoid an Amended Return.
Having to amend a return is not only time consuming, but must be done through the mail. If you rush and guess the numbers at the end, you may wind up needing to amend the return. Avoid all the stress and just file for an extension.
3. Reduce your chance of audit.
There is a school of thought that filing for an extension reduces your chances of being audited. Here’s why: IRS auditors allegedly examine a certain percentage of returns in filing date order to fill a quota. A return may sidestep this auditing procedure entirely because the auditor’s quota is filled before getting to extended returns.
4. For business owners, buy time to fund a retirement plan.
If you’re self-employed, you might be using a Keogh plan, SEP, etc. to save for retirement. The annual contributions reduce your tax liability, but you must raise the money to fund the account! An extension can possibly allow you an extra six months to come up with the money.
5. Unforeseen Circumstance.
Even if you intended to file your tax return by April 15, sometimes life gets in the way. For example, an unexpected illness or death in the family may disrupt you from gathering all your tax documents.
If your extend, do your best to estimate the correct tax— an extension DOES NOT extend the time to pay.
About the Blogger: John J. Kasperek, Enrolled Agent, is a 25 year tax veteran who recommends you to consider extensions as an alternative to rushing to complete. There’s no reason not to take advantage of this opportunity that the IRS makes available if it is warranted.