Tax Topic

Extension - Extra Time to File Your Tax Return

The first thing to know about an extension is that it is an extension of time to file your tax return vs. an extension of time to pay any tax that is due. There is no free extension of time to pay the tax due (otherwise we'd all do it!). The second thing to know about extensions is that it makes your tax preparation fee increase.

When we file an extension for you, we must use best information provided by you to estimate your tax due, so you can pay any 2023 tax due with the extension Form 4868 which is due no later than April 15, 2024. This generally means more or less preparing your tax return twice, once with the estimated information and again with final information, which means more time and a higher preparation fee. Therefore, best to avoid extensions if possible.

The IRS will grant a six-month extension to October 15, 2024 for personal tax returns without needing any specific reason. Extensions of time to file are useful in situations where you know most of your information but haven't received all your documents in time to file a complete and accurate tax return. For example, you may be waiting on a slow K-1 or corrected investment income Form 1099. Better to file an extension rather than file an incorrect tax return which would need to be amended later.

Four choices on next steps if you need an extension:

1. If you are confident you will owe no tax, it's pretty easy for us to file an extension for you, no signatures necessary. Just send us an email with instructions to file a no-payment extension for you. We will confirm receipt of the instructions and will efile the extension.
   
   
2. If you are going to owe and you know how much you want to pay to the IRS with the extension (whether it's a full or partial amount), tell us the amount and we will set up an efiling extension for you. We will also need your bank name, routing # and account #. To do this, send us an email with the amount and bank information, and we will send you a Form 8878 for signature. You upload an executed copy and we efile it. The IRS will then withdraw the funds from the account on April 15, 2024.
   
   
3. If you are going to owe, don't know how much, and want us to prepare an estimate, we need as much of your tax information as you have. The more information, the more accurate the estimate for the extension. To do this you must have all the information you want us to use for the estimate to our office no later than Friday, March 24, including your bank information. There won't be much time to go back and forth for more information, so it's important to give us as much as you have the first round in the way of relevant information in as organized a manner as possible.
   
   
4. Lastly, you can prepare your extension and file it with the IRS via mail yourself if you wish, either no payment or with a check. The extension form is Form 4868. Form 4868 and instructions are available here: http://www.irs.gov/pub/irs-pdf/f4868.pdf. Not trying to push anyone away, just providing the option.

In all cases, the extension must be filed by April 15,2024. For #1, #2, and #3, the time we incur to prepare the estimate and extension doesn't necessarily carry well into the final tax return. At this point in the tax season, we are really short on time, so we prepare the estimate for the extension with broad strokes and encourage you to buffer the amount you are going to pay. Any underpayment will be subject to .5% per month penalty plus Federal Interest Rates (8% at Q4, 2023) and you will get any overpayment back when we file the actual tax return. However, filing the extension timely, with or without payment, allows you to avoid failure-to-file penalties.

We circle back to work on extended tax returns in June. We have to turn to business quarterly tax returns the latter half of April, then we take a bit of time off, then we're back at it.

< Back to Tax Topics page