April 15, the date when state and federal income tax returns are due, is only a few weeks away. While many millions have already filed their tax returns and received their refunds, there are millions more who have yet to get started on preparing their taxes.
If you are one of those who is not ready to file your tax return and are unsure you will be ready to file by April 15, then an extension may be right for you. Thankfully, requesting a six-month extension is free; it only requires the taxpayer to complete and submit Form 4868 and the IRS will grant an extension automatically.
It is worth noting that an inability to afford paying tax due is not a good reason to request an extension. If a taxpayer owes taxes as of April 15, that money is still due to the IRS on April 15 even if the taxpayer files an extension. Filing an extension in this case will result in the taxpayer having to pay interest and penalties in addition to the tax balance already due.
In the case of an inability to pay, the taxpayer is better off informing the IRS and working with them on a payment plan to minimize interest and penalties.
But aside from an inability to pay taxes due, what are some of the reasons why taxpayers should file an extension? Following are some of the main reasons taxpayers need an extension.
Missing Tax Documentation
Employers and financial institutions are supposed to mail W-2s, 1099s, and other tax documentation to taxpayers by January 31 each year. However, there are times when those entities experience problems that delay the issuance of tax documentation. In addition, even if entities mail the documentation on time, the forms may get lost in the mail or even lost by the taxpayer once they are in hand.
If a taxpayer does not realize he is missing or has misplaced required supporting documentation, the taxpayer may not have time to request another copy and still get the taxes filed by April 15. An extension will provide the taxpayer the extra wiggle room to obtain necessary supporting documentation and complete preparation of their tax return.
Understanding Tax Law Changes
Each year, numerous tax law changes go into effect. It may be beneficial to a taxpayer to use an extension to be sure they are aware of all of these tax law changes when preparing their tax return. If a taxpayer fails to regard a tax law change that calls for payment of more tax, the taxpayer may face interest, penalties, or fines for underpaying the IRS and filing an inaccurate tax return.
Alternatively, if a taxpayer fails to identify tax credits or other tax law changes that would reduce the tax liability owed, the taxpayer may pay the IRS too much, shorting the taxpayer out of his own hard-earned money.
Unexpected Situations in Life
Each year, many taxpayers suffer from unexpected life events that occupy time they may otherwise have spent preparing their tax returns. These events may include illness or death of a family member, natural disasters, or being the victim of a serious crime. When such issues arise, an extension may give the taxpayer the necessary extra time to get their documents ready to file.
What if I have questions about filing an extension or other aspects of filing your state or federal income tax return?
If you have questions about or need help completing your state or federal income tax return, a tax attorney can help. A tax attorney can review your individual circumstances and prepare your return according to the tax laws, as they have the training and experience necessary to understand the tax law.
You can speak with a tax attorney by completing the form on this web site or calling the telephone number at the top of this page. The initial consultation with a tax attorney is free of charge. All conversations with a tax attorney are completely confidential.
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Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.