It is estimated that as many as 19 million people filed extensions for their tax returns last year, according to the IRS, and it is expected that at least as many will file for their 2022 returns. However, not everyone understands what it means to file an extension for their tax returns, or how it could impact them. Here are five things you need to know about filing an extension for your taxes:
1. You can automatically file an extension for your returns for six months
- Any individual taxpayer can file Form 4868 before the deadline to get an extension on their tax returns for up to six months. You do not need to have a specific reason for filing for an extension, and everyone can get one. You do, however, need to submit information for how much you will owe in taxes.
2. You can avoid penalties for failing to file on time
- One of the biggest reasons that people seek an extension for submitting their tax returns is that they run out of time to do them. By filing an extension, you can avoid any penalties that might arise for being late, giving you more time to get everything done. This can be especially helpful if you have something else taking up your time and attention that you cannot focus on at the moment.
3. It gives you more time to collect necessary information, if you need it
- Another important reason that people file for an extension is that it can give them time to compile necessary information or documentation. Submitting a return with missing or incomplete information can result in significant penalties, and may lead to legal issues. WIth an extension, you can give yourself time to make sure your return is complete and accurate, avoiding these potential problems.
4. It can help you if you are out of town during tax season
- Sometimes, people will file for an extension because they are out of town during tax season. This can make it harder to fill out or file tax returns in a timely fashion, possibly causing them to miss important filing deadlines. With an extension, you have more time to get your tax return in order, which can be helpful for those who need to do something on paper or who struggle with electronic filing.
5. If you do not pay when you file your extension, you could owe interest
- That being said, an extension on filing your tax return does not mean that you are exempt from paying your taxes. While it gives you time to get your return in order, it does not give you extra time to pay. If you do not pay your taxes on time, you could owe additional penalties, as well as interest on the amount owed. That is why it is essential to get proper tax advice from professionals with the knowledge and experience to guide you through the process.