Tax Extension PitfallsPublished:
The first and foremost consideration when filing for a tax extension is to understand that the extension allows for the later filing of the Federal Income Tax Return, it does not allow for late payment of the taxes due without interest or penalties which are incurred from the due date of April 15th. The estimated taxes due must be calculated and paid when filing for the tax extension.
Remember though, that the penalties for filing late are much more than the penalties for paying late, so by all means, if you need to file for a tax extension to prepare your tax return, do so by the April 15th deadline and give yourself some breathing room and a chance to review all opportunities to reduce the amount of taxes due either by qualifying tax deductions or tax credits. One disadvantage to filing for a tax extension is that once April 15th passes, you are no longer able to file your Federal Income Tax Return electronically. It must be completed and sent through the U. S. Postal Service or some other ground service means.
The IRS will notify you when they receive your Federal Income Tax Return, however, they don’t always notify you when you file your Tax Extension Form 4868. ALWAYS make a copy of any tax documentation you prepare and send. Filing for that tax extension also relieves any angst and stress related to rushing to collect documents, finding an auditor or tax professional available to assist with your tax preparation, or actually preparing the tax forms yourself. However, the downside is that you still have to make time to gather up and prepare for filing your Federal Income Tax Return by the October 15th deadline.
Don’t put it aside and figure you’ll cross that bridge in the future ? else you’ll be in the same boat you were when you opted to file for the tax extension ? rushing to meet the filing deadline! Remember too, that contributions to qualifying retirement plans, that can be itemized and deducted from your adjusted gross income (AGI), have to be made before the April 15th deadline in order to qualify for the preceding tax year. This holds true whether or not you file for a tax extension.
Additionally, as you’re preparing to apply for a tax extension, estimate the amount of taxes you owe that year, and if in doubt, pay a little more than you think you owe. Pay the estimated taxes due when you file for the tax extension. If you overpay, you will receive a tax refund. Interest is charged from April 15th on any unpaid taxes due the Internal Revenue Service and they will collect!