Filing a tax extension is not a setback. In fact, it can be a strategic move that allows you more time to establish a solid and optimal tax strategy. If you need extra time to ensure your entire situation is optimized or if you don’t have certain documents in time to file by the deadline, it's always better to extend than to hastily file.
There are common situations where filing an extension is the best course of action:
If you're unable to provide your accountant with all of the documentation necessary for filing an accurate return, filing an extension becomes necessary.
This happens commonly when a corporate return gets extended, for example, and the business owner is unable to file a personal return without the corporate return being filed. There are many situations where certain documents may not be available in time for your CPA to do a thorough job assessing your overall tax situation.
Sometimes, your CPA may need additional time to thoroughly scrutinize your financial blueprint. Rushing such processes could lead to missed financial opportunities or errors. Filing an extension may give your CPA the time they need to deliver an optimized return.
Most CPA firms have deadlines they set in order to give their team enough time to complete all of the tax returns by the federal deadline. In cases where a client is unable to provide all of the information prior to that specific deadline set by the CPA firm, your accountant may file an extension for you.
The deadline for filing an extension is the same deadline for filing a return. So, for individual returns, the deadline for filing an extension is April 15. Once filed, you now are allowed until October 15 to file your return.
Remember, even if you file an extension, you still need to remit an estimated tax payment before the due date. Your CPA can help you calculate how much to pay to stay in compliance. Once your final return is filed, this amount will be reconciled either with an additional payment or a refund.
It’s very important to understand that when you file for an extension, you are extending the deadline for filing your return- not for paying your tax liability.
Filing a tax extension may be strategic for your personal situation and give your CPA the time needed to ensure accuracy and optimization of your tax strategy. If you need to file one, don't be overly concerned, and work with your CPA to file your return as soon as possible before the October 15 deadline.
