Though the April 15 tax filing deadline is still a couple of months away, now's the time to start focusing on getting your return in order. But what if your tax situation is complicated, you're struggling to find a reliable tax preparer, and you're already stressed at the notion of getting your return in on time?
If you have doubts about your ability to complete your tax return by April 15, there's a solid option you might consider -- filing for a tax extension. The good news is that you don't need a particular reason to ask for one. It doesn't matter if you're missing key tax forms or you're just plain keen on procrastinating -- as long as you request an extension by the tax filing deadline, the IRS will grant it, and you'll then have an additional six months to get that return completed. But before you settle on going that route, know that if you owe money to the IRS, filing a tax extension is a move that could end up hurting you in the long run.
You still need to pay your taxes on time
One major misconception about tax extensions is that they give you more time to pay your tax bill if you end up owing money to the IRS. Not so. The only thing a tax extension will do is give you more time to submit your return.
Now if you owe the IRS money, that's helpful in its own right. That's because you'll face a failure to file penalty equaling 5% of your unpaid tax bill for every month or partial month your return is late, up to 25% of your unpaid tax bill, if you don't submit your return by the April 15 deadline or get an extension.
That said, an extension won't let you off the hook with regard to the late payment penalty you might be liable for. The late payment penalty applies to filers who owe money to the IRS and don't fork it over by the April 15 deadline. If you fail to pay your outstanding tax bill by then, your late payment penalty will equal 0.5% of your unpaid taxes per month or partial month they go unpaid, up to a total of 25%.
Of course, the trouble with getting a tax extension is that until you do the math involved, you won't necessarily know whether you owe the IRS money or not. Therefore, while it's a good idea to request an extension if you find that you're missing key documents pertaining to your taxes, or you need time to consult with a tax preparer, you shouldn't jump to get one out of sheer laziness. Doing so could create a scenario where you're racking up interest on your tax debt needlessly.
Another thing to keep in mind about tax extensions is that the later you submit your return, the longer you'll have to wait on your tax refund if you're due one. And if you're counting on that money to cover an outstanding bill or tackle a costly medical issue you've been putting off, the last thing you want to do is subject yourself to more of a wait.
Remember, the sooner you file your taxes, the less stressed you'll be about having to deal with them. And that's reason enough to submit your return on time and just get it over with.