Filing an Extension: Things to Know
What is it?
Filing an extension moves the due date of your return from April 15 to October 15.
Extensions are automatically granted by IRS; you do not need a compelling reason to file an extension.
Does an extension increase my chance of audit?
There is zero evidence that an extension increases your risk of audit.
Some financial professionals believe filing an extension actually decreases your risk of audit, but this has not been verified by IRS.
The IRS does not frown upon extensions.
Leslie, Nick & Lisa all file extensions for their personal returns.
If extensions had negative consequences, we would not do it for ourselves.
Do I have to wait until October for my personal return to be filed?
No, we will continue to finalize returns starting after April 15 (after a short breather).
Our goal is to have everyone who submitted their stuff to us before March 31 to be complete by May 31.
Will I be penalized?
Maybe...an extension is an extension to file, not an extension to pay.
If you think you have a balance due, making a payment with your extension could save you some penalties and interest.
If you are due a refund, there is no penalty for filing an extension.
What does IRS charge for paying the tax due after April 15?
For 2022, the interest + penalties is .75% per month (about $7.50 for every $1,000 you owe, per month).
Example: $5,000 balance due paid June 15 is $75 ($5,000 x .0075 x 2 = $75)
How much should I pay with my extension?
CPAs are available to prepare an extension estimate a week before the April 15 deadline.
An extension estimate costs $250 for a taxpayer with a business and $150 for a client without a business.
If you anticipate owing less than $10,000 then it's probably not cost-effective to request an extension estimate (based on the interest & penalty cost vs. CPA estimate extension cost).
If you don't have the money to pay IRS, then don't request an extension estimate.
You would be surprised how many people respond by saying "I can't pay anything" after we prepare an extension estimate.
Lastly, extensions are our friend.
Extensions are easy.
Extensions give us more time to file.
Having more time to file puts less stress on our talented staff.
Having more time ensures we are thinking through all possible strategies and scenarios which could ultimately lead to a lower tax bill.