Written by Luke Frye
Please don’t mistake this for tax advice. Your specific tax situation is unique, always consult with your accountant, tax advisor or counselor.
The IRS may seem like an unforgiving institution, always breathing down the necks of small business owners for the next payout. But the taxman is actually quite obliging when it comes to allowing extensions on your tax filings.
What is a tax extension?
It’s easy to request several more months to finish your tax paperwork. However, don’t get too excited: The extension is only for the filing of your return, not for the actual payment of your taxes.
If you’re filing for an extension, estimate how much you owe (your accountant can help you with this) and pay it by the regular deadline to avoid penalties. You also have to file your extension request that day.
Here are dates to know:
March 15: S-corps and partnerships tax filings and extension requests due
April 15: Sole proprietor and single-member LLCs tax filings and extension requests due
Sept 15: Extended deadline for partnerships and S-corps tax filings
Oct 15: Extended deadline for individual tax filings
Individual filers can apply for an extension online using Free File or by indicating that an estimated income tax payment is for an extension when paying with Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit card.
Pros and cons of extending
So should you request an extension on your taxes? There are pluses and minuses to doing so. Here’s a look at why you might or might not want to take this approach.
Pros
Allows procrastination: Requesting an extension gives you more time to reconcile your accounts, fill out your forms, and — let’s be honest — binge a few more episodes of The Marvelous Mrs. Maisel before you have to file.
It’s normal and okay: Asking for an extension on your taxes is very routine and commonplace. The IRS will not be suspicious of you for doing so.
Brings no risk: Asking for an extension does not increase your risk of being audited. There may be an increased risk for forgetting to file your taxes later, but that’s on you!
Should be cheap or free: There’s no charge from the IRS to delay your filing, and a reputable tax preparer is unlikely to charge you a fee either. At Timber Tax we don’t charge any additional fee to file for an extension.
Cons
Leaves unfinished business: Delaying your filing means that you have tax concerns lingering for months instead of having that aspect of your business put to bed. This can take up mental space you could be using for other things, and may also increase your stress.
Suffers from time lag: As you work through your filings, it may become harder to remember and access needed information as time goes by. As the previous year recedes, the quality of your tax return may decrease as you forget details from many months ago.
Can create financial roadblocks: You might not be able to apply for loans, apply for financial aid for your children’s education, or engage in other financial transactions for which you need to supply a prior-year return.
Ultimately, the best course is to apply for an extension if filing on time is an undue burden, but try to resist using it as a tool to push off until tomorrow what you could do today. Feel free to reach out to Timber Tax if you have any questions.
Luke Frye is a Washington CPA and co-founder of Timber Tax, tax advisors for entrepreneurs. You can book a call to talk with Timber here.