File Now or File an Extension?
by Susannah McQuitty
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We’re still about a month and a half away from the April 17 filing deadline, so it’s understandable to wonder if you should file your tax return or a tax extension. You don’t always have to be sweating in the eleventh hour to fall back on a tax extension (speaking to myself here, too). For some, it’s actually a calculated choice.
What does a tax extension do?
If you file a tax extension, the IRS gives you an extra 6 months to file your tax return. You still have to pay any taxes owed by April 17, but the extra time provides some space for you to get all your forms together.
How do I pay taxes without filing my return?
If you can’t complete your tax return, a calculated approach to avoiding the underpayment penalty is to pay 100% of last year’s taxes (including withholdings and estimated payments). Even if that amount turns out to be less than your current tax liability, most fees and penalties will be waived or greatly reduced if you at least pay what you owed last year.
Another option is to pay at least 90% of your tax for the current year; if you’re close to finishing your return, you might be able to make a safe guess on the full amount. Also, if you owe less than $1,000 after subtracting withholdings and refundable credits, you shouldn’t be penalized.
Why would I want to file an extension long before the April deadline?
Unless you’re just afraid you’ll forget, there’s no need to file an extension early, but there’s also no harm done if you do. If you’re a freelancer, self-employed businessperson, or have other ownership interests and investments, your taxes can get complicated. You may be waiting on Forms 1099-NEC, Schedules K-1, or other income reporting documents in order to file a complete return. If you don’t think you’ll get everything in time, by all means, e-file your extension today—you can do this on 1040.com in just a few minutes. This will give you peace of mind and an extra six months to gather what you need.
If you do have all of your tax documents, there’s good reason to file as soon as possible—it’s a great way to keep your refund secure. If you file with your information, tax fraudsters can’t.
Let us know below if you think filing your tax return now or filing an extension will work best for you this year!
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