If you're running up against the tax deadline and don't have your return ready to go, the last thing you want to do is submit it late. That's because if you owe money to the IRS, you'll face a failure-to-file penalty equal to 5% of your unpaid tax bill per month or partial month your return is late, up to 25% of your outstanding tax debt.
Thankfully, you have the option to request an extension and file your taxes after the deadline. In fact, with an extension, you'll get an extra six months to get your return over to the IRS. But before you go that route, be sure to understand the pros and cons involved.
Advantages of filing a tax extension
The IRS makes it pretty easy to get more time to file your taxes. You don't need to justify your reason for requesting an extension -- you just need to fill out the right form and send it in. Here are some benefits of doing so:
1. You'll be less stressed during the filing process
Having more time to get your taxes done will make the process of completing your return more pleasant. If your taxes are complicated, you can tackle them a little bit at a time rather than feel compelled to push life's many responsibilities aside to complete them.
2. You'll lower your chances of making mistakes
An error on your return could open the door to an audit or create a scenario where that return is downright rejected. By buying yourself more time to complete your taxes, you'll reduce your likelihood of making a mistake by virtue of being rushed.
3. You'll have more time to find the right tax preparer
Even if you've historically filed your own taxes, the 2018 tax code overhaul might make the process more difficult for you this time around. If that's the case, you might want the help of a tax preparer -- but since the good ones tend to be busy during tax season, waiting until after the filing deadline might allow you to hire someone solid rather than settle for someone mediocre.
Drawbacks of getting a tax extension
While there are certainly some benefits to getting more time to file your taxes, here's why extensions aren't always a good thing.
1. You'll accrue interest on your unpaid taxes, if you owe any
While a tax extension will help you avoid the failure-to-file penalty if you owe the IRS money, it won't get you out of paying that bill by the original April 15 deadline. Of course, you won't know how much money you owe the IRS, or if you owe money at all, until you complete your return. But if you do owe something, you'll face a late payment penalty of 0.5% per month or partial month your bill remains unpaid, up to a total of 25%.
2. You'll delay your tax refund
Each year, the majority of tax filers get some sort of refund. Now thanks to the aforementioned tax overhaul, experts predict that refunds will be lower this year across the board, and that a smaller percentage of filers will get one. But if you're expecting money back from the IRS and you get an extension, you'll have to wait that much longer to get the cash that's rightfully yours.
3. You'll have your taxes hanging over your head
The benefit of submitting your tax return on time is getting a generally unpleasant task over with. With an extension, however, you'll have it looming for longer, which might add to your stress load.
Should you get a tax extension?
If you find yourself woefully behind on your taxes as the filing deadline approaches, or you're missing key paperwork pertinent to your taxes, then it pays to get an extension, because you don't want to guess at numbers on your return and risk under- or overreporting income. But if your return is fairly uncomplicated and you know you can bang it out yourself, there's really no reason to put it off. If you do get that extension, keep the aforementioned consequences in mind -- especially if you have reason to believe you owe the IRS money this year.