Individual Taxes

Down to the wire — Do you really need an extension?

It’s about the time for my phone to start ringing with clients calling about extensions.  At least half of them will hear a dissapointing answer from me though.  No, filing an extension will not extend the due date of the money that is due to the IRS.  This is one of the biggest misunderstandings about taxes.

So if it does not give you more time to pay the IRS, what good is an extension?  There are some legitimate reasons for extensions:  you have not received your K-1 statements from businesses that you are involved in, you are waiting for additional information or corrected statements, you want to contribute to your SEP (Simplified Employee Pension) plan but need more time to gather the funds.  Remember though that it is not just a matter of asking for an extension.  It is necessary to estimate the actual liability to the IRS for an extension.  Any balance due that you have with the taxing authorities should be paid by April 15 to avoid penalties and interest.  Also, you have to request an extension with most states as well.

Although I don’t recommend putting off filing your taxes forever, if you don’t have your taxes completed by now, don’t burn the midnight oil and look for a post office that is open until midnight on April 15.  It is now time to get the extension package ready to go.  Take a little time to make sure you get all of the deductions you deserve and file an accurate return.  Do pay the IRS and state if you have a balance due, but gather the information you need and don’t try to rush through the return.   Don’t let this task hang out until April 15!

Donna Bordeaux is a Certified Public Accountant and Personal Financial Specialist with Bordeaux & Bordeaux, CPAs, PA in Lake Wylie, SC (a suburb of Charlotte, NC).  For further information about Donna or her firm, please visit www.charlottecpafirm.com.