Should You File an Extension? Pros, Cons, and What You Need to Do
Tax season is in full swing, and as the April 15 deadline approaches, many taxpayers are feeling the pressure to get everything filed on time. If you're struggling to gather your documents or need more time to ensure accuracy, you may be considering filing an extension.
But is filing an extension a smart move? While an extension can provide much-needed breathing room, it’s not always the best option—especially if you owe taxes. In this post, we’ll break down when filing an extension makes sense, the risks involved, and how to do it correctly.
What is a Tax Extension?
A tax extension gives you an additional six months to file your federal tax return, moving the deadline from April 15 to October 15. However, an extension to file is NOT an extension to pay. If you owe taxes, you still need to estimate your tax liability and pay by April 15 to avoid penalties and interest.
When Filing an Extension is a Good Idea
There are several situations where requesting an extension makes sense:
✅ You’re Missing Important Documents
If you haven’t received all your tax forms (like 1099s, K-1s, or investment statements), waiting to file can prevent errors and potential IRS audits.
✅ You Need More Time to Maximize Deductions & Credits
If you’re self-employed or own a business, you may need more time to gather business expenses, home office deductions, or retirement contributions.
✅ You’re Dealing with Major Life Changes
Big events like starting a business, getting married, having a baby, or moving can complicate your taxes. Filing an extension allows you to fully assess how these changes impact your return.
✅ You Want to Avoid Filing Mistakes
Rushing to file just to meet the deadline can lead to errors, missed deductions, and higher tax bills. An extension gives you time to double-check everything.
✅ You Need More Time to Fund Retirement Contributions
Certain retirement contributions (like SEP IRAs for the self-employed) can be made up until the extended deadline if you file an extension.
When Filing an Extension is NOT a Good Idea
🚨 You Expect a Refund
If you’re owed a refund, there’s no benefit to delaying your return. The IRS won’t send you money until you actually file!
🚨 You Owe Taxes and Can’t Pay
If you owe money, an extension does not give you more time to pay. Any unpaid balance starts accruing interest and penalties after April 15.
🚨 You Need Your Tax Return for Loans or Financial Aid
Many lenders require your most recent tax return when applying for a mortgage, business loan, or FAFSA. Delaying your return could slow down these processes.
How an Extension Affects Tax Payments
📌 Key Fact: You Still Have to Pay by April 15
The IRS requires you to estimate and pay your taxes on time, even if you file an extension.
📌 Penalties for Late Payment
If you don’t pay at least 90% of what you owe by April 15, you’ll face:
✔️ Failure-to-Pay Penalty – 0.5% per month on the unpaid balance (up to 25%).
✔️ Interest Charges – Based on the federal short-term interest rate, plus 3%.
📌 If You Overpay
If you pay more than you owe, you’ll get a refund when you file.
📌 If You Underpay
The IRS may charge penalties if you significantly underpay.
Tip: If you're unsure how much to pay, it's better to estimate on the high side—you’ll receive a refund if you overpay.
How to File an Extension (Step-by-Step Guide)
1️⃣ File Form 4868 – You can submit this form electronically or by mail to request an automatic six-month extension.
2️⃣ Pay Any Taxes Due – Use IRS Direct Pay, EFTPS, or mail a check to cover your estimated tax liability.
3️⃣ Keep a Record of Your Extension – Make sure you get confirmation from the IRS that your extension was accepted.
4️⃣ File by October 15 – Use the extra time wisely! Don’t wait until the last minute again.
Need Help Filing an Extension or Estimating Your Taxes?
Filing an extension isn’t always the best option, but when done correctly, it can help you avoid mistakes and stay compliant with the IRS.
At Simply Balanced Accountants, we help individuals and businesses:
✔️ File extensions correctly and on time
✔️ Estimate tax payments to avoid penalties
✔️ Plan tax strategies to reduce next year’s tax burden
📞 Call us: 517-897-2144
📧 Email us: connect@simplybalancedaccountants.com
🌐 Visit our website: www.simplybalancedaccountants.com
If you’re unsure whether to file an extension, contact us today—we’ll help you make the right decision before the deadline! ⏳💰
