Preparing For A Tax Appointment p. 3

Extensions

Extensions are filed en masse on April 15th each year. There is no way that all returns can be filed by the original due date. Extensions are automatically granted upon filing the application. Clients are occasionally concerned that there may be an increased possibility of being audited if they file an extension. This is not the case. Our actual experience is that we have very few returns audited annually. I have filed extensions for my personal return each year from 1974 and forward. I simply could not file on time after I started my own business. I have not been audited in any of these years.

There are several reasons why extensions are actually filed. Frequently, all of the data needed to accurately complete the tax return has not been received in time to complete the return by the due date. On other occasions, we do not receive the client’s data in time to complete the return by the due date. Sometimes we simply have more work than our staff can complete by the due date. In the last few days before the due date, we concentrate on completing returns in process, in preference to starting yet another return that we might not complete by the due date. Also in those last few days before the due date, we prepare estimates for our clients so they can pay any amounts owed by the due date.

Remember that the Extension to File the return later is not an Extension to Pay later. We notify our clients so they can pay the estimated amount by the due date with the Extension to File the return later. If they cannot or do not wish to pay the amount we estimate to be due, there is no need for our client to come to our office, because we can sign and mail the extension on their behalf. If large refunds are due, we try to get those returns filed sooner rather than later. Since the first payment of the estimated taxes is also due on April 15th, we do the estimates for amounts due with the returns to aid in preparing estimates of taxes due for the current year.

The first extension is for 4 months, and an additional extension is available for 2 months. (In some circumstances other due dates apply and extensions may be automatic, but that is beyond the scope of this essay.)

If you are due a refund, it usually does not matter whether or not you have obtained an extension. Penalties and interest are based on how much you owe. However, if you owe the IRS and file late, the penalty and interest are substantial. If you file for an extension and expect to owe money, but can not pay it with the extension, penalties (a much smaller one than for filing late) and interest accrue until the actual amount owed is paid. Therefore, we recommend that you always file an extension if your return will not be prepared by the due date.

If we receive your return too late for completion before the due date, even if it is at the last minute, we will file an extension for you and include any payment that you provide.