Consumer Alert: Need to file a tax extension? Here’s the good, bad, and the ugly.
ROCHESTER, N.Y. Procrastinators, this consumer alert is for you.
The tax deadline is just a month away. And some of you reading this right now haven’t even started. While many of us agree with the saying by Mark Twain, “Never put off till tomorrow what can be put off until the day after tomorrow,” in the case of your taxes, procrastination can cost you.
Many tax preparers charge more in the waning days before the deadline. And if you file late, you can face penalties and fees. There is another option. You can do the 4868 dance. 4868 is the form you need to file an extension. Almost everyone is approved automatically. And it gives you until Oct. 15 to file.
But this is important. An extension to file your taxes does not mean you don’t have to pay on time. If you owe, you still have to give Uncle Sam your money by April 18, so says Al Burgos of Burgos Income Tax Inc.
“If you work with a tax professional, we can do a quick estimate for you and we’ll recommend how much you should send in,” said Burgos. “We could send a payment in, and then we can hold up on your tax return until Oct. 15.”
That’s important. You have to estimate what you’re going to owe and send it in on time. If you can’t pay in full, you can apply online for a short-term or long-term installment agreement. You’ll still be charged penalties and interest. But they’ll be lower than failing to make payments at all.
So here are the pros of filing an extension:
- You get more time.
- Your tax preparer may charge less when it’s not tax season.
- It’s easy to file a 4868
And contrary to popular belief, it does not increase your chances of being audited.
Here are the cons of filing an extension:
- You still have to pay on April 18 even though you’re waiting to file.
- If you miscalculate how much you owe, you’ll owe penalties and fees.
- You’ll have to wait longer to get your refund.
In short, if you’re filing an extension simply because you need more time, doing the 4868 dance may be just the right thing. If you’re filing an extension because you can’t pay, that’s the wrong reason. You’ll end up paying far more in the end.
Some folks get a personal loan to pay their taxes because the interest may be less than the penalties assessed by the IRS. Talk to your tax professional to figure out the best option for you.