3 Reasons Not to File a Tax Extension

As taxpayers, we’ve all been there — the April 15 tax deadline is fast approaching, and you still need to file your income tax return with the Internal Revenue Service (IRS). For whatever reason, you’re not quite ready to file your federal and state income taxes, but you don’t want to be stuck with a failure-to-file penalty. So, what can you do?

While you can always file a tax extension by using IRS Form 4868, Application for Automatic Extension of Time to File, to get extra time to file, it may not be the right choice depending on your situation.

Here are three good reasons not to file a tax extension for your federal tax return this year.

1. You want to put off paying your tax bill.

Don’t file a tax extension to avoid making a tax payment. Even if you file for a tax extension, you’re still required to pay any tax due by the tax filing deadline. If you don’t pay by the due date, any unpaid tax will accrue interest and penalties, meaning you’ll end up paying even more.

Instead, if you don’t think you can pay your entire tax bill by Tax Day, consider enrolling in an IRS payment plan. While you’ll still owe applicable interest and late penalties, you’ll have an agreement in place with the IRS to pay it off as soon as possible and avoid even bigger late payment penalties down the road.

2. You anticipate receiving a tax refund, so you’re not worried about it.

Even if you’re expecting a tax refund, it’s best to file your return as early as possible to have that cash in hand. Just think of all the possibilities for that refund money — you could invest it or use it to boost your retirement nest egg, for instance.

Plus, there’s always the small chance you may owe money, even if you didn’t the last tax year. You can never be completely certain about the amount of tax you may or may not owe until you file. Tax laws often change from year to year, and you don’t want to be left paying penalties and interest because you assumed you wouldn’t end up with a tax bill.

3. You file an extension out of habit.

If you put in an extension request every year, take a minute to ask yourself why. Do you always wait until the last minute and not give yourself enough time? Maybe you first filled out an extension form a few years ago because you were waiting to receive important tax documents, and it just became a habit?

Instead of delaying the process until later in the year, try to file your return by the Tax Day deadline if you can. Not only will you get it over with, but you’ll also have extra time to plan for any unexpected tax bills and even reduce your chances of tax identity theft.

This article is for informational purposes only and not legal or financial advice.

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