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You Applied for an Extension of Time to File – Now What?

You submitted an Application for Automatic Extension of Time to File your U.S. Individual Income Tax Return. What exactly does this mean? Well, it means exactly what it says. It is an extension of time to file your annual tax return. However, it is NOT an extension of time to pay your taxes. If you expect to owe money with your annual tax return, the balance must be paid with your extension application prior to the April 15th filing deadline (or on whatever date the deadline falls that particular year). If you do not pay your balance with the extension application, you will be subject to a failure to pay penalty as well as interest charges, which accrue from the original due date until the tax is paid.

Once your Application for Automatic Extension of Time to File is accepted by the IRS, you have 6 months from the original filing deadline to file your tax return (this date would be October 15th for an original filing deadline of April 15th). In most cases, we do not recommend applying for extensions. However, it may be necessary in some situations. For example, if you have an interest in a partnership or other pass-through entity, you will need to wait until you receive Form K-1, which details a partner’s share of business income and deductions. If the business’s tax return is not filed by April 15th, obviously you would not receive your K-1 by the due date, meaning you would not be able to file your individual income tax return on time. This would be a situation where you would need to file an extension and pay any estimated balance due by the original due date.

 There may be other circumstances where it would make sense to file an extension. For instance, you may have an unforeseen family/medical emergency and are unable to gather your tax documents prior to the filing deadline. Or perhaps you have a brokerage account and you are waiting for corrected year-end statements which will not be furnished to you on time. Or maybe you just want some extra time to review your tax return and ensure you are receiving all of the tax benefits available to you. Regardless of why you file an application for an extension of time to file, it is crucial to understand that it is not an extension of time to pay your taxes!

Tax season (generally February 1st – April 15th) can be daunting for many people. It can be confusing and stressful, depending on the complexity of the taxpayer’s tax return and financial situation. Many people wait until the last minute to file their tax returns, which leads to even more stress and anxiety. As your CPA firm, we think you should be on top of your taxes and finances year-round. Instead of waiting until March or April to get your documents together, perhaps try to gather everything right after the New Year, in January or February. You should get your tax documents to us as soon as possible to ensure a timely filing of your return. We inform our clients that they must provide us with all of their documents by March 15th in order for us to prepare and file their returns by April 15th. Again, we try to avoid filing extensions for our clients unless it is absolutely necessary.

To wrap things up, we want to reiterate that we are here to help throughout the year. We recommend that you do your part by staying informed and organized. We encourage you to reach out to us with questions. Just because the “tax season” ended, or it’s the middle of summer, does not mean you shouldn’t be thinking about next year’s taxes. If you have a question, just ask! As always, we are here to make your life less taxing!