Filing a Tax Extension – Pros and Cons
When you file an extension, it’s like asking the IRS for more time to finish and file a tax return. You are automatically granted another six months to file, moving the deadline for filing taxes from April to October. A business can also request an extension, but it only moves their deadline to mid-September. Even though an extension moves the deadline, giving you extra time to file, it doesn’t give you more time to pay taxes owed. There are some pros and cons for filing a tax extension.
Pros for Filing a Tax Extension
- Six more months to finish the return
- Reduce penalties for being late
- Saves a tax refund if you file after the extension deadline
- Gives the self-employed more time to fund retirement plans
- More time to recharacterize contributions to an IRA
Cons for Filing a Tax Extension
- Extra time isn’t additional time to pay your taxes
- Some taxpayers are not eligible to file an extension
- Contributions to ROTH IRA and Traditional IRAs are still due by the April deadline
How Difficult Is It to File an Extension?
It’s not difficult to file for an extension. Individual taxpayers can file online using a Form 4868. If you choose to file online, there is the additional benefit of receiving an IRS confirmation code notifying you the extension request has been received. Businesses can use a Form 7004 to request an extension. It is important to file your taxes if you file an extension. In some cases, individuals do not meet the filing requirements, which means they are still responsible for filing their taxes by the April 15 deadline.
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