A few weeks ago, countless Americans rushed to get their tax returns in by the April 17 deadline. But for those who procrastinated and couldn't get their act together in time, thankfully, there was the good old tax extension to fall back on.
The neat thing about tax extensions is that there's no requirement to justify your need for more time; all you need to do is fill out a form, and you'll automatically be granted an additional six months to submit your return. That said, just because you have many, many more weeks to file your return doesn't mean you shouldn't get moving on it. Here's why.
1. You'll delay your refund
Most years, the majority of tax filers wind up with some sort of refund. If the government is sitting on your cash, and you keep delaying that return, you'll end up hurting yourself -- especially if you happen to need the money. And most Americans do need the money. Only 39% of U.S. adults have the capacity to cover a $1,000 emergency. Since the average tax refund last year was well more than twice that amount, that's reason enough to complete that return rather than continue putting it off.
2. You'll accrue interest charges if you owe money
One lesser-known fact about tax extensions is that they don't actually buy you more time to pay your tax bill. Rather, they simply give you additional time to get your return submitted. Therefore, if you do your taxes and come to find that you underpaid the IRS in 2017, you'll be on the hook for interest charges dating back to the original filing deadline of April 17. In fact, the penalty for paying your tax bill late is 0.5% of your unpaid debt for each month or partial month you fail to hand over that cash, up to a total of 25%.
Of course, you may not come to realize you owe money until you actually do your taxes. Furthermore, you can't exactly pay your tax bill if you haven't run the numbers to see what you're looking at. But that's why it's crucial to tackle that tax return sooner rather than later -- even if you technically have until October to get it done.
3. You don't want to fall into the same trap again
Some people miss the tax filing deadline because they're legitimately waiting on paperwork or run into unavoidable issues (such as health problems) that cause them to need to file an extension. But if you didn't make the deadline this year due to sheer procrastination, then chances are, you're going to run into the same problem come October. That's why you're better off scheduling some time to complete your taxes and getting it over with. The sooner you do, the less you'll have to worry about that nagging yet critical task hanging over your head.
Though filing a tax extension may have spared you some grief this past April, it's not an excuse to ignore your return for the next five months and change. You're better off submitting that return as soon as you can and buying yourself some peace of mind in the process.