Tax season can be a stressful time for many people, especially those who are unsure if they have all the necessary documents and information to file their taxes accurately. Fortunately, taxpayers have the option to file for a tax extension, which can alleviate some of that stress and give them extra time to gather their documents and prepare their tax return.

Every year, millions of taxpayers request an extension on filing their return. It’s important to note you do not need a reason to file an extension. Once the paperwork is filed, the extension is automatic with no questions asked. Filing an extension is often to your advantage – especially this filing season.

What is a Tax Extension?

A tax extension is a formal request to the Internal Revenue Service (IRS) for additional time to file a tax return. It’s important to understand an extension does not give taxpayers additional time to pay taxes. Any tax owed must be paid by the original filing deadline. Failure to pay by the original deadline can result in penalties and interest.

What Does an Extension do?

An extension allows more time to fully review and maximize opportunities related to the new tax law. The extension period for an individual return is six months. For most years, this means the due date for your individual tax return is extended from April 15 to October 15. In years where April 15 falls on a Saturday, Sunday or holiday, the deadline for individual federal income tax returns is moved to the first succeeding day that is not a weekend or holiday. For the 2022 filing year, the individual tax return deadline is April 18, 2023. 

Below are a few common questions on filing extensions:

What are the Benefits of Filing a Tax Extension?

Filing for an extension can be a smart choice for many taxpayers. You can file for an automatic extension and enjoy six more months to get your documents in order and properly prepare your tax return. An extension is another tax tool available to all taxpayers to allow them to properly file their taxes and pay the correct amount due. Filing a correct return reduces the potential for having to file an amended return. It is often less expensive and easier to file an extension rather than rushing now with the possibility of needing to amend your return later.

Does an Extension Increase the Risk of an Audit?

Extending does not increase your likelihood of being audited by the IRS. There is no stigma attached to filing for an extension. The IRS will not hold it against you or mark your tax return for an audit. One of the best ways to avoid an audit is to ensure you have enough time to properly and accurately complete and review your tax return.

Does Filing for an Extension Delay Payments?

No – extensions only postpone the tax filing deadline. Any tax owed is still due on April 18. When filing Form 4868 to request an extension, you should also pay an estimate of any taxes due in order to avoid interest and penalties. Interest and any penalties start to accrue after the April 18 filing deadline.

Filing for an extension allows taxpayers to avoid a more punitive 5% per month penalty for late filing. In other words, it’s better to file an extension and try to come up with taxes due by October 16, 2023 (and pay a small penalty for late payment) than to not file for an extension and accrue a 5% per month penalty (in addition to interest) for late filing and late payment.

How do you File for a Tax Extension?

To file for a tax extension, taxpayers must complete and file Form 4868 by the original due date of their tax return. Form 4868 is available on the IRS website and can be filed electronically or by mail. When completing Form 4868, taxpayers will need to provide their name, address, Social Security number (or taxpayer identification number) and an estimate of any tax owed. For taxpayers who are unfamiliar with the tax code or have more complicated financial situations, working with a CPA during the extension process can be beneficial. A CPA can help ensure you are taking advantage of all available deductions and credits, and can help you navigate the extension process smoothly.

To learn more about whether an extension might be a good fit for you click here, and as always, reach out to an Adams Brown advisor.