Common Tax Myths – Requesting an Extension

There are many things that are “common knowledge” about income taxes. Unfortunately, some of them are simply wrong. This short series of blog posts will address some of them. This post will examine a couple of myths relating to filing requests for extensions.

Request an extension. An extension will give you more time to pay your taxes.

Not only is this untrue, it will cost you. Form 4868 – Application for Automatic Extension of Time to File U.S. Individual Income Tax Return is used to request an extension of time to file not an extension of the payment due date. In fact, the instructions for the form caution:

Although you aren’t required to make a payment of the tax you estimate as due, Form 4868 doesn’t extend the time to pay taxes. If you don’t pay the amount due by the regular due date, you’ll owe interest. You may also be charged penalties.

Another part of this myth is the belief that requesting an extension also means that it is not necessary to do anything with your taxes by the normal due date. However, to qualify for an extension, you must attempt to estimate your tax liability. The instructions for the form say:

  1. Properly estimate your 2017 tax liability using the information available to you.
  2. Enter your total tax liability on line 4 of Form 4868, and
  3. File Form 4868 by the regular due date of your return

Never request an extension. Doing so will increase your chances of being audited.

This one is also untrue. The specific criteria that the IRS uses to select returns for audit is a secret. However, there is no reason to believe that requesting an extension of time to file your return will increase the likelihood that you will be audited. In fact, if you think about the reasons that people frequently request extensions, it may be possible that filing an extension request could reduce your chance of being audited. If this sounds confusing, consider that the reason that many people find themselves answering questions from the IRS include errors and missing information. Many taxpayers simply cannot meet the filing deadline because they do not have all their tax documentation. Filing without waiting for documents such as W-2s, 1099s, K-1s, or other documents is a good way to make mistakes. If you have a business, you may also need extra time to prepare your books.

If asking for extra time helps you prepare a complete and accurate return, then you should ask for extra time. On the other hand, if you can complete your return on time, you should make every effort to do so. If you are due a refund, all you are doing is postponing the return of your money, and if you have tax due, it is better to know the exact amount and arrange to pay even if you do not have the cash on hand.

How do you request an extension?

The IRS makes it easy. There are three ways to request an extension of time to file your individual income taxes.

  1. Use the IRS payment system available through the IRS website. The IRS will process and extension when you pay your estimated tax electronically.
  2. E-file using tax software or ask your tax professional to e-file an extension for you. You can e-file for free using the IRS website.
  3. File a paper Form 4868.

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