Equifax

Finance Blog

When, Why, and How Should I File for an Extension?

Written by Eva Rosenberg on March 29, 2013 in Tax  |   2 comments

Right around this time of year, the tax dance heats up and the pace gets frantic. It’s the time when tax professionals have to try to keep up with the frenetic twists and turns of emerging tax laws, deadlines, IRS announcements, and warnings. But don’t…

filing-taxes-extensionRight around this time of year, the tax dance heats up and the pace gets frantic. It’s the time when tax professionals have to try to keep up with the frenetic twists and turns of emerging tax laws, deadlines, IRS announcements, and warnings.

But don’t finalize your tax return just because the April 15 tax-filing deadline is around the corner. Take a deep breath. Pause. Look everything over. If you’re still missing anything important, don’t file that tax return. Put it on extension.

Why? If you file your tax return now, with mistakes or incomplete information, you’re going to have to amend it. Normally, only a computer sees your return. When you amend, real people look at it. All of it. Not just the part you’re amending. So if you don’t want to deal with an increased chance of an audit, file it correctly in the first place.

When should you file for an extension?

You should file for an extension any time between April 1 and April 15. Use Form 4868 for your personal tax return, and use Form 7004 to extend practically everything else—partnerships, estates and trusts, gift taxes, etc. (Note: Calendar year corporations’ tax returns need to have been extended by March 15, so if you didn’t do that already, you’re late.)

Remember to also file extensions with your state. You can find state tax forms here.

What does the extension get you?

An extension buys you six more months (until October 15) to file your personal, 1041 estate, and gift tax returns. You will only get five extra months to file partnership returns because they’re due on September 15 of each year.

What doesn’t the extension get you?

Technically, these forms give you additional time to file your tax return—but not additional time to pay. The IRS says that you must pay the full amount of tax you expect to owe for 2012 by April 15. But in my experience, folks with businesses, those with large incomes and huge bills, and the chronically disorganized never have enough money by April 15.

What kind of trouble will you be in if you can’t pay?

None, really. Send in whatever you can afford on April 15 with your extension—at least $25. Whatever balance is left will earn a late payment penalty of one half of 1 percent per month (or 6 percent per year) and interest of about 4 percent per year. This is probably cheaper than your credit card or loan rates, so don’t stress over it.

Next, devote the next six months to two things:

1) Finish up your accounting and find all the paperwork you need so you can prepare your tax return(s) properly.

2) Earn money so you can pay off your 2012 tax obligation by October 15. You’ll find some of the savvier Internet entrepreneurs and brick-and-mortar businesses running tax sales during this time. What’s the purpose of these sales? They are purely to generate the funds to pay taxes. It’s a great idea. Just make sure you set aside money to pay the taxes on those profits as well.

Eva Rosenberg, EA is the publisher of TaxMama.com , where your tax questions are answered. Eva is the author of several books and ebooks, including the new edition of Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.

2 comments

  1. Jessica Reagan Salzman says:

    Best extension article I’ve ever read/seen. Thanks, Eva! Colleagues like you make me proud to be in this industry! (:

    • EFX Moderator, EM says:

      Jessica, I’m glad to hear that! Eva is a top-notch tax expert and we’re very happy to have her on our team. Thanks for posting.


Leave a Comment


Name :


Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.


Tax Archive

Stay Informed Sign up for our FREE Equifax email Newsletter