Here’s who should consider filing a tax extension and how to do it

Advisors

mediaphotos | E+ | Getty Images

If you still haven’t filed your taxes, you’re not alone. But if you’re worried about the April 18 deadline, it may be time to consider an extension, financial experts say.

Nearly one-third of Americans don’t file until the last minute, according to a report from IPX 1031, with many waiting because they don’t expect a refund or find the process “too stressful and complicated.” 

Tax season has become increasingly complex, leaving professionals with more work, such as reconciling stimulus payments, advance child tax credits and other pandemic-related changes. 

“Everything is taking two to three times longer than it should to get a return out the door,” said Matt Metras, an enrolled agent and cryptocurrency tax specialist at MDM Financial Services in Rochester, New York.

Moreover, many taxpayers didn’t receive Form 1099-B, covering profits and losses from brokerage accounts, until early March, slashing their time to crunch the numbers, he said.

“I’m filing more extensions than I ever have in my entire career this year,” Metras added.

I’m filing more extensions than I ever have in my entire career this year.
Matt Metras
Cryptocurrency tax specialist at MDM Financial Services

There are many reasons to consider a tax extension, said Elliot Herman, a certified financial planner and CPA with PRW Wealth Management in Quincy, Massachusetts.

For example, some filers have complicated situations, like small businesses requiring more time, he said. And others may not receive all their tax forms — such as Schedule K-1, covering business income, deductions, credits and more —  by the deadline.

“There aren’t any major downsides,” Herman said, of extensions. However, you must file an extension by April 18, and you still need to pay taxes owed to avoid late payment penalties. 

How to file a tax extension

If you can’t make the April 18 deadline, you can file an extension for your federal tax return online, pushing the due date to Oct. 17. You may need to do the same for state taxes, depending on where you live.

Anthony DeLorenzo, a CPA with JustAnswer, a website connecting consumers to live experts, said you can file an extension by submitting Form 4868 electronically with IRS Free File, regardless of income.     

If you can’t cover your balance, you may have payment options through the IRS. But you must file an extension to qualify.

You may also move your filing deadline to Oct. 17 without Form 4868 by making a payment through IRS Direct Pay, and choosing “extension” as the reason from the dropdown menu.

However you file for an extension, it’s better to take your time and get your tax return right rather than to rush and end up having to amend your 2021 return later, Metras said. 

Articles You May Like

The Home Improvement Projects that Offer the Biggest Bang for Your Buck
China’s Liu He and U.S. Treasury Secretary Janet Yellen hold virtual talks
American Airlines offers pilots nearly 17% raises in new contract proposal
Constellation Brands Trading Lower After Earnings
Trump media company subpoenaed in federal criminal probe of SPAC deal