Reasons to Get a Tax Extension
Each year, between 10 and 11 million U.S. tax payers file for a tax extension for one reason or another. Filing for a tax extension doesn’t mean you have more time to pay your taxes, it simply means you are granted more time to get your paperwork together and file your U S Individual Income Tax Return. There are a number of reasons tax payers elect to file for a tax extension. Especially with complicated returns which require a mountain of supporting documentation, there are times when all of the information is not readily available by the April 15th deadline.
Having an additional 180 days to gather, review, prepare and submit your return, allows you to be more thorough and potentially take advantage of tax deductions and tax credits that may be overlooked if you are in a hurry to prepare your income tax return. Another reason for needing a tax extension is that you may be living outside the country when the deadline for filing occurs or you may be serving in a combat zone or in a qualified hazardous duty area. This may also come into play when your tax extension deadline occurs and you expect to still be out of the country. You may be able to garner an additional 2 months time (December 15th) provided you include a letter explaining the need along with your Form 4868 and file by April 15th.
In addition, accountants and tax professionals are extremely busy just before the deadline and rushed for time, inadvertently overlooking opportunities to itemize more deductions or credits. They are certainly more busy near April 15th than they are closer to October 15th, which is the common tax extension deadline. Some say that filing a tax extension minimizes your chances of being audited. As auditors have to meet certain quotas, most have met their quotas by the time the deadline rolls around for the tax extension filing date of October 15th. Additionally, the ability to extend the deadline for filing allows those business owners offering Simplified Employee Pensions (SEP’s) or Simple IRA’s to their employees, filing for a tax extension can provide more time for the business owner to fund those accounts.
Filing for a tax extension is relatively easy and can be accomplished online or by paper tax form. Many people use FileLater for their online tax extensions. There are two types of forms ? one for individual tax payers (Tax Form 4868) and one for business owners (Tax Form 7004). There are also additional tax extension forms, less commonly used, which can accessed from the IRS.