Taxes are one of the most confusing and anxiety-provoking elements for individuals, particularly when it comes to filing taxes.
For many people, an extension on their tax deadline can provide a sense of relief.
But does filing for a tax extension increase your chances of being audited by the Internal Revenue Service (IRS)?
Let’s dive right in.
Key Takeaways
A tax extension is a request to the IRS for more time to file your federal income taxes and provides an additional six months beyond April 15th (the typical deadline).
Filing an extension does not increase your chances of being audited by the IRS.
Filing a federal income tax extension is free and easy with automated systems that help reduce the chance of human error, making life easier for both taxpayers and IRS agents during peak season.
What Is a Tax Extension?
A tax extension is a request to the IRS for more time to file your federal income tax return. The extension provides an additional six months beyond April 15th (the typical deadline), which moves the filing deadline from that day up to October 15th (the typical extension deadline).
This extension can help to avoid any late-filing penalties as long as payment for estimated taxes owed is also sent in when the request is made. It can be a useful tool for those missing important documents or needing extra time to get their paperwork in order.
If you need help organizing all your important tax documents and family information, Trustworthy is here for you. It’s a great way to keep all your tax documents in one place.
Even if an extension is requested, the IRS still expects you to submit a tax estimate by the deadline of the tax year.
Do Tax Extensions Increase Your Chances of Being Audited?
For most taxpayers, filing for an extension can be a great way to buy extra time and avoid costly penalties. But are you more likely to get audited if you file for an extension?
In short, the answer is no. Filing a tax extension does not increase your chances of getting audited by the IRS. When taxpayers need additional time to file their taxes, the IRS encourages them to take advantage of extensions.
This is because an extension serves as a sort of safety net for taxpayers. By filing an extension, you are essentially giving the IRS a heads-up that more time is needed to compile all of your information and submit it accurately.
Moreover, your chances of getting audited may actually be decreased if you file an extension.
Financial advisors and accountants often theorize that IRS agents have audit quotas that become filled during the tax season time frame. After the tax season is complete, they are less likely to audit returns with extensions since their quotas have already been met.
Is It Safe to File Your Tax Audit After the Due Date?
Yes, it is safe to file your tax audit after the due date as long as you have filed for an extension. Filing a tax extension does not increase your chances of being audited by the IRS.
However, you should be aware that filing an extension will give you more time to file, but it won't change when taxes are due. You will still need to pay your taxes by the extended deadline, or you may be subject to penalties and interest fees.
How to File a Tax Extension
If you need more time to file your taxes, you can request an extension by filing Form 4868 with the IRS. This form is available online on the IRS website and provides up to six extra months from April 15th to submit their returns.
You will still need to estimate and pay your taxes due by the original filing date in order to avoid any penalties.
To apply for an extension, you will need to enter basic information such as name, address, Social Security Number, and the amount of tax you expect to owe.
You can also provide your payment information if you expect a refund or need more time to pay the taxes due. Once completed, submit it electronically through one of several online services, such as TurboTax, for the IRS to process your request quickly and securely.
Does the IRS Hate Tax Extensions?
No, the IRS does not hate tax extensions. In fact, it provides an automatic 6-month extension to anyone who files for one with no questions asked.
By filing for a tax extension, you are demonstrating compliance with IRS regulations and making the task of processing tax returns during peak season easier for both taxpayers and IRS agents.
Additionally, filing a Federal income tax extension online is now quick and easy with automated systems that help reduce the chance of human error. Tax extensions effectively show your compliance with IRS regulations and make life easier for both parties involved during tax season.
5 Reasons to Consider Filing an Extension
Filing an extension can be a beneficial strategy, especially if you are uncertain of the information required to accurately file your taxes. Here are 5 reasons why:
1. Avoid Penalties
Filing an extension and properly completing and accurately reporting your expected tax liability can save you the cost of late filing penalties, which is up to 25% of the balance owed.
2. Saves Money
If self-employed, additional time for filing an extension allows you to come up with funds to maximize pension savings or fund employee contributions, which can lower your tax liability.
You'll also get more time to research deductions and consult a tax professional.
3. It’s Free
You will not be charged if you request an extension, and there is software where you can file the extension for free.
4. Avoid Chaos
Tax deadlines can mean a lot of chaos, causing long lines at the post office and potential software or hardware problems. Filing an extension gives you extra time to organize your information and paperwork, reducing chaos.
5. Potentially Less Auditing Risk
Filing an extension can potentially reduce the risk of being audited, as there may be audit quotas that are set by the IRS.
Frequently Asked Questions
Is there a downside to filing a tax extension?
Yes, there is a downside to filing a tax extension. It will delay any refund you may be expecting since your return won't be processed until the extended deadline. Additionally, you may be subject to penalties if your return is late or inaccurate, even with an extension in place.
What increases IRS audit risk?
Some of the main red flags that the IRS will look for that may increase audit risk are incorrect, missing, or incomplete information. Large refunds or net operating losses may also trigger a potential audit.
How long is a tax extension good for?
A tax extension is typically good for six months, giving taxpayers until around October 15 to file their returns.
How do I know if my tax extension was approved?
Once you submit your tax extension request to the IRS, they will send an electronic acknowledgment that confirms it has been accepted. This confirmation should arrive within 24 hours of submitting your filing.
If you don't receive the confirmation, contact the IRS to confirm that your extension was approved.
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