Tax day has come and gone but your return still isn’t done. You’re probably thinking that’s ok you filed an extension so you can sit back and relax until October. Here are a few reasons why you should get that return done now, and not wait for the extended deadline.
- The extension is only for filing taxes and does not extend the time you have to pay your taxes. Penalties for not paying start to accrue monthly after the April due date and continue until the balance is paid in full or you reach the maximum penalty. Interest on the unpaid tax compounds daily and cannot be reduced and does not have a maximum amount. A completed tax return is the only way to determine the exact amount of taxes you owe and ensure you don’t acquire penalties and interest!
- The longer you wait to prepare your return, the better the chance you will lose necessary important documents. While many of your income documents can be duplicated, proof of those deductions are not always easy to find. This is a common issue we saw with the 2016 floods in the Baton Rouge area. While the IRS extended the October extension date for 2015 tax returns for those impacted by the flood, they still had the issue of finding their documents in order to prepare the return. Most people were not thinking of their taxes when trying to clean out their flooded homes and businesses and are now faced with the headache of trying to recreate proof of expenses.
- The longer you wait to file, the longer you have to wait to receive your refund. The IRS will charge you interest on your unpaid taxes, however, they will not add interest to your refund. A late filing means you miss out on money that could have been in your pocket months ago.
- For those required to make estimated tax payments the current year’s payments are often based on last year’s tax obligation. If you wait until the extension date to file, you will have already made three estimated tax payments without having an accurate assessment of what you should be paying. This can lead to a vicious cycle of each year falling behind on tax owed and not having the available funds to pay last year’s tax and the current year’s estimated payments at the same time.
Extensions are great for when you just don’t have time to get everything together before Tax Day, but just because you filed one doesn’t mean you have to wait till October to get that return done. If you filed an extension, get those documents together and let’s get started on that return. It will feel great to check "2016 tax return" off of your to-do list and come October you’ll be stress free.