Tax Return Extensions 101

The filing deadline for personal income tax returns is quickly approaching. If you haven’t started getting your tax information together already, you’re running out of time. If you’re finding it too difficult to get our tax return finished in time, you can submit an extension of time to file. I’ve found that many clients are confused about what an extension is and what it means. Let’s clear up any questions you may have.

Six Extra Months

Generally speaking, personal income tax returns are due April 15th of each year. If the returns are filed after that date, you will likely be penalized and may pay additional interest on the taxes. However, taxpayers can file Form 4868 in order to get an extension of the due date. By filing an extension, you are able to move the due date back so that it is due in October of that year.

Still Need to Pay

While an extension gives you six more months to file the return it does not give you any extra time to pay. In other words, if you owe any tax it must be paid by April 15th of each year. This is one of the most misunderstood part of the tax return extension. If there is any additional tax due when the return is filed later, then you will likely be charged interest and penalties on the remaining balance due. In some cases, the IRS will reject the extension if there isn’t enough paid in when it is filed.

No Additional Audit Risk

Many taxpayers fear that filing an extension will automatically generate an audit. That is not the case. While there are definitely aspects of a tax return that the IRS looks at closely, simply extending the filing deadline does not ring any alarms bells with them.

What are some additional benefits of filing an extension?

There are a few other benefits of filing a tax return extension. Here are just a few:

• If you are self-employed, you can make a contribution to a qualified retirement plan like a SEP-IRA. Filing an extensions provides an extra six months for funding the retirement plan.
• If you have a complex income structure, filing an extension will allow additional time to determine if there are any elections that can be made to reduce taxes.
• An extension can reduce the stress getting all of your information together at the last minute and waiting at the post office to file by April 15th.
• If there is a complicated financial transaction being reported, filing an extension allows for additional time to understand exactly how it impacts your tax return.

Tax return extensions are used by millions of taxpayers each year. If you need an extension filed, please give us a call so we can discuss your specific situation and how we can help you.

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  Extension Applications

  Need more time to file your income tax return? Below are federal and state forms to request a six-month filing extension.

  • Federal Extension Application – Form 4868
  • State of New Jersey Extension Application – Form NJ-630
  • Pennsylvania Department of Revenue Extension Application – Form REV-276