What does filing an “extension” do?
An extension is a form filed with the IRS to request additional time to file your federal tax return. The extension period is six months, extending the due date for submitting your individual return to Oct 15 (for 1040s). In many states, filing an extension with the IRS will automatically extend the time to complete a state income tax return, but some states still require a separate extension form.
Filing an extension grants you additional time to submit your complete and accurate return, but you still need to estimate whether you will owe any taxes and pay that estimated balance by the original due date.
Extending your return allows you and your CPA more time to prepare your tax return to ensure an accurate tax return filing. In many cases, you may still be waiting for additional information (e.g. Schedule K-1, corrected forms, etc.) to complete your return.
Why does my CPA suggest we extend my tax return?
If your CPA recommends that you file an extension, it may be because of many reasons such as:
- The volume of date or complexity of certain transactions (i.e. sale of rental property) on your return requires additional time.
- The amount of time remaining in filing season is limited for the CPA to complete returns by the due date because of late-arriving information.
Many CPAs have a “cutoff” or deadline for clients submitting their tax information so they can plan their workload to ensure they complete all client returns and extensions by the due date.
Your CPA may suggest filing an extension if pending quidance or legislation affects aspects of your return.
Am I more likely to be audited if I extend?
Extending will NOT increase your likelihood of an IRS audit.
It is better to file an extension than to file an incomplete return or if you have not had time to review carefully before signing.
Is there anything I can do to avoid filing an extension if I know I am missing some information now?
If you know you will be waiting until the last minute for one or two documents, you may be able to reduce the chance of having to file an extension by providing all other available documents to your CPA as soon as you receive them. By doing so, your CPA can prepare a draft return for you to review and discuss in advance. And your CPA may be able to add the missing piece of data or last-minute information and complete your returns by the original due date.
Source: AICPA
Leave a Reply