Pros & Cons
If you’re a little late to the game this tax season, you may be considering a tax extension. Whether you are waiting for important tax documents to arrive in the mail or simply need more time to evaluate your deductions, extra time to file may help you. While obtaining an extension is relatively easy and quite understandable in most cases, there are downsides as well.
The Pros of Getting a Tax Extension
1. You’ll be less stressed.
Taking on your taxes can feel like an exhausting task. By filing an extension, you can get them done without the stress you may have felt while rushing to file in time. You will also have more time to find the right tax preparer. Even if you have filed your own taxes before, the 2018 tax code changes may make things more difficult this year. Though most good tax preparers in Springfield Missouri are busy during tax season, an extension may allow you to find a quality, experienced firm after the rush is coming to an end.
2. You’ll have a more accurate tax return.
If you are waiting on documents or information to use in your taxes, an extension will allow you to file a more accurate and complete tax return. Not to mention, you may avoid errors you might have made while rushing to meet the filing date.
3. You’ll avoid the late filing penalty.
The penalty for missing the filing date is equal to 5 percent per month on any tax due plus a late payment penalty of half a percent per month. If you file an extension and then file your return by the extended deadline of Oct. 15, you’ll avoid the 5 percent per month late filing penalty. The late filing penalty will begin from Oct. 15, which creates a deferral on this penalty if you file after Oct. 15.
4. Your tax return will be preserved.
There’s a three-year deadline for receiving a refund check from the IRS if you’re due one. This three-year statute of limitations begins on the original filing deadline—April 15, 2019 for tax year 2018. The refund statute of limitations is also extended by six months when you file an extension. This can preserve the ability of taxpayers to receive their federal tax refunds even if they’re behind with submitting their tax returns.
The Cons of Getting a Tax Extension
1. You won’t have extra time to pay.
Extra time to file is not extra time to pay. Of course, you don’t know how much money you owe the IRS, or if you owe money at all until you complete your return. But if you owe something and don’t pay a least 98 percent of the tax due, you will be liable for late-payment penalties and interest. The failure to pay penalty is one-half of one percent for each month, or part of a month, up to a maximum of 25% of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full.
2. You’ll delay your tax refund.
The additional time you take to file your tax return is extra time you won’t have the money you are owed.
3. You’re delaying the inevitable.
Extension or not, you need to turn in a tax return. Some could argue that a tax extension just makes your tax return hang over you for a longer amount of time. You will need to gather your tax documents and file, whether it be now or in 6 months.
If you seek help or answers about filing your tax return and obtaining an extension, contact your tax preparer in Springfield Missouri. Schultz, Wood & Rapp P.C. is happy to help you navigate this year’s tax season as your trusted tax advisors.