April 15, that dreaded date, is less than a week away. So if you haven’t filed your federal income tax return yet out of simple procrastination, it goes without saying that you should do so as soon as possible.
But what if you had every intention of filing, yet you are missing necessary information? In that case, you may want to file for an extension.
Some taxpayers expecting a Schedule K-1, for instance, which is used to report income from partnerships and some other businesses, often receive the form late. (It’s not unusual for them to arrive over the summer.) Or perhaps you suspect you are missing a Form 1099, for miscellaneous income.
In that case, it is better to file for an automatic extension, said John Petosa, professor of accounting practice at the Joseph I. Lubin School of Accounting at Syracuse University. The IRS matches the filings it receives from businesses with personal returns, and if they do not match up, you will most likely hear from the agency.
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“It’s more important to file an accurate return than to hurry up and just file,” Petosa said. “So rather than guess, file an extension.”
If you file for an extension by April 15, you automatically receive a six-month grace period and have until Oct. 15 to file your return. You do not need to provide a reason for requesting the extension.
You may also decide to file for an extension if you are already undergoing an audit. Say your 2012 and 2013 tax returns are being audited. If you file your 2014 return, the IRS will probably include that in the audit, too, Petosa said. But if you file for an extension, it will not be included – and perhaps the audit will be completed in time for you to file the 2014 return in October.
One downside of filing for an extension is that if you are expecting a refund, you will not get it until you actually file your tax return.
And if you owe money, filing for an extension does not give you extra time to actually pay your tax bill. You must do your best to estimate what you will owe and pay that amount by the April 15 deadline, said Melissa Labant, director of tax advocacy for the American Institute of Certified Public Accountants.
(If you are owed a refund, you typically will not owe a federal late-filing penalty, according to the tax software maker TurboTax, since the penalty is based on a percentage of the tax due. But that may not be the case with state returns.)
One problem with waiting until the last minute to file is that if you have any questions, it is going to be tough to get answers from the IRS. The agency’s staff has been significantly reduced by federal budget cuts. Callers can expect long wait times. John Koskinen, the IRS commissioner, told a forum at the Tax Policy Center this week that as the deadline approaches, six of every 10 people calling the agency are failing to reach live help.
Here are answers to some of the most commonly asked questions about tax filing:
Question: How do I file for an extension?
Answer: Submit Form 4868 by April 15. You can file it electronically or mail it to the IRS.
Q: What if I am ready to file, but I owe taxes that I can’t afford to pay?
A: Go ahead and file the return even if you cannot afford to pay the full amount due, Labant said. You should pay as much as you can, to help minimize potential penalties and interest, then contact the IRS to discuss the situation.
“It’s better for you to contact them first,” she said, rather than waiting for the agency to contact you.
Q: What if I miss the deadline for filing my return and I did not file for an extension?
A: File as soon as possible – again, to minimize penalties and interest you may owe.