An extension is a form filed with the IRS to request additional time to file your federal tax return. The extension period is six months, which extends the due date for submitting your final returns from April15 to Oct. 15*. In some states, filing an extension with the IRS will automatically extend the time to complete a state income tax return. Filing an extension grants you additional time to submit your complete and accurate return, but you still need to estimate whether you will owe any taxes and pay that estimated balance, for the 2016 filing season by April 18, 2017.
Extending your return allows you and your CPA more time to prepare your tax return to ensure filing of an accurate tax return. In many cases, you may still be waiting for additional information (e.g., Schedule K-1, corrected 1099s, etc.) to complete your return.
If we recommended that you file an extension, it may be due to many reasons, such as the volume of data or complexity of certain transactions on your return requires additional time. The amount of time remaining in filing season is limited for the CPA to complete client returns by April 15* due to late information received from numerous clients. Many CPAs have a “cutoff” or deadline for clients submitting their tax information so they can plan their workload to ensure all client returns and extensions are completed by April 15*.
Extending your return will NOT increase your likelihood of being audited by the IRS. It is better to file an extension rather than to file a return that is incomplete or that you have not had time to review carefully before signing. The primary benefits of an extension are to provide for additional time to file returns without penalty when you are waiting for missing information or tax documents (such as corrected 1099s). Just remember that an extension provides additional time to file, but not additional time to pay. Penalties may be assessed if sufficient payment is not remitted with the extension. Additionally, you may qualify for additional retirement planning opportunities or additional time to fund certain types of retirement plans (e.g., SEP IRA). Finally, the extension is often less expensive (and easier) to file than rushing to file now, and then possibly needing to amend your return later.
Filing for an extension does not change your return processing procedures, you still should give your CPA whatever information you have as early as possible or as soon as it becomes available.Expect to pay any anticipated taxes owed by April 18. You still need to submit all available tax information to your CPA promptly so he/she can determine if you will have a balance due or if you can expect a refund. If you are required to make quarterly estimated tax payments, your first quarter estimated tax payment is due April 18. Your CPA may recommend that you pay the balance due for last year and your first quarter estimated tax payment for this year with your extension. If you are anticipating a large refund, chances are your CPA will likely try to get your extended return done as soon as possible once all tax information is available.