Earlier today, I had a conversation with a taxpayer who was questioning a tax preparer’s recommendation to file for an extension. The taxpayer wanted me to suggest that it was a bad idea, calling it “risky.”
I don’t know how filing for an extension got a bad reputation, but it’s clear that many taxpayers believe that it will result in an audit. Not only do the statistics not bear this out, but it doesn’t make good sense: I maintain that it’s always better to file a complete, correct return on extension than a rushed, flawed return by Tax Day.
I even tweeted about it:
It’s true that some taxpayers who file extensions do so because they waited until the last minute. But taxpayers may have all kinds of reasons for putting off filing a tax return until a few months later—and the best part? The IRS doesn’t care why you want an extension. So long as you follow the rules (more on that in a minute), the extension is automatically granted.
About 10 million taxpayers traditionally file extensions, but that number appears to be climbing. Last year, the IRS received 137,144,000 individual tax returns as of April 21, 2023—that’s roughly 25 million less than the 162,037,000 returns it received by year-end. While not all of the returns were on extension, most likely were.
So why might you want to file for an extension? It gives you more of what most of us want: more time. By filing for an extension, you’ll have until October 15, 2024, to timely file a return.
Filing For An Extension Can Make Good Tax Sense
Filing for an extension gives you time to confirm that you’ve received all your forms. While employers are supposed to provide employees with Forms W-2 and other wage statements by Jan. 31, 2024, some other forms—like Forms 1042-S, 1095-C, and some Forms 5498 may not show up until much later.
There may be other reasons why a form hasn’t hit your inbox yet—you could be a beneficiary of a trust or estate or a shareholder or partner in a pass-through entity, which means that Schedules K-1 associated with those returns aren’t yet available. (That’s why business owners like me regularly file for an extension.)
You might be funding an IRA—you have until Tax Day to do so—and need to include that information on your individual tax return.
You may need time to another look at your tax return. So often, we’re just rushing from one task to another—but taking the time to scan your return and check for omissions or errors is smart. This is true even if your returns are prepared by a paid professional.
Or maybe your return is simply more complicated this year than in previous years. Not sure if you’ve included all of those crypto transactions? Sold your house and not sure about the basis? Forgot that you inherited an IRA? So many things can happen during any given tax year that are different from the previous year. Taking the time to run down the list of what you should have included can help avoid a nasty penalty later.
What if you want to discuss your returns with your tax preparer? Most professionals won’t have the time for a lengthy sit-down around tax day. Taking time after Tax Day to review returns for completeness and ask questions about any items you may not understand can pay off down the line.
Or what if you’re just not ready? Maybe your receipts are still in boxes. Maybe you haven’t been well. Maybe your kid is graduating from high school, and you’ve just been overwhelmed. Sometimes, life gets in the way. The IRS understands that there are reasons why you may need more time to file. But whatever your reason for not being ready to file is yours. Again, you don’t need to tell anyone—even the IRS—why you’re requesting the extension. It’s a no-questions-asked form, and the extension is granted automatically if you follow the rules.
While taxpayers can now file amended returns electronically, the processing is still done manually, resulting in lengthy delays. Filing for an extension and filing a complete, accurate tax return later tends to be a more efficient option than filing with a plan to amend your return later.
How To File For An Extension
To file for an extension, you can:
The regular “timely filing” rules apply, so be sure to get your extension postmarked or e-file accepted by the end of the day on April 15, 2024. Assuming you’re on time, you will have six more months to get your return to the IRS and not be subject to the late-filing penalty. This year, with an extension, you’ll have until October 15, 2024, to timely file a return.
(Note that for residents of Maine or Massachusetts, the tax deadline is Wednesday, April 17, due to Patriot’s Day and Emancipation Day holidays.)
You May Need To Pay
Remember that an extension is an extension of the time to file and not an extension of time to pay. If you expect to owe at tax time and you’re filing for an extension, you should make a payment with your extension request to avoid interest and penalty later.
The late payment penalty is 0.5% of the tax owed after the due date, up to 25% of the taxes owed. The IRS will also charge you interest—those underpayment interest rates currently sit at 8%.
The due date for your taxes remains April 15, 2024, even if you are on an extension.
Automatic Extensions
Some taxpayers get an automatic extension of time to file without having to file for it. Those include:
- If you’re a U.S. citizen or resident and you live outside of the U.S. or Puerto Rico, and your main place of business or post of duty is outside of the U.S. or Puerto Rico, or if you are active duty military and live outside of the U.S., you qualify for a two-month extension without having to file Form 4868. That moves your due date to June 15 to file and pay. However, interest is still due on any tax payment made after April 18.
- Members of the military and others serving in combat zones or hazardous zone areas generally have until at least 180 days after they leave the zone to file returns and pay any taxes due.
- Taxpayers affected by natural disasters may have extra time. Recent extensions for taxpayers have been issued in Rhode Island and Maine. For more details or to see if you’re eligible, check the disaster page on the IRS website.
If you need even more time, you can file Form 4868 by the due date. However, filing Form 4868 when you’ve already been granted extra time due to these special rules doesn’t give you an additional six months. Your due date after filing Form 4868 remains October 15, 2024 (six months from April 15, 2024).
Complete, Correct Returns Are Better
While it’s always a relief to have your tax return over and done with by Tax Day, it’s not the end of the world if that doesn’t happen. And in some instances, it’s a smarter move. So go ahead, and file for an extension. You don’t have to explain. We get it.
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