Instead of rushing to April 15 to file your taxes, you can go on extension. Does filing an extension increase your odds of audit?
Everyone can get six extra months by filing (electronically or by mail) an extension. You need to pay what you owe–the extension is to file your return not to pay–but there are good reasons to take the extension.
First, going on extension gives you more time to think. Use the time to gather your records and get professional advice. File accurately so you don’t have to amend later. Amended returns often come about because people rush. File once correctly so you don’t have to do it again.
The extension is automatic – no IRS approval required. You just get the extra six months, period. But the extension is to file, not to pay. Make your payment and use the time to make your return accurate and complete.
Going on extension also allows for corrected Forms 1099 and K-1. You may be waiting for Forms K-1, gathering documents or seeking professional advice. But even if you have all your forms and are ready, what if you receive a K-1 or 1099 after you file?
The earlier you file, the greater the risk you will receive corrections. Going on extension makes it less likely that you will be surprised by a tardy corrected K-1 or 1099. You may as well file once and file correctly.
Some people say that going on extension increases audit risk. Some people say exactly the opposite. But there is no hard evidence to support either theory. It is worth saying it again: there is no increased audit risk to going on extension. All taxpayers worry about IRS audit risk. Opinions vary and there are many old wives’ tales about what triggers an audit. However, it is unlikely that going on extension increases IRS audit risk.
Going on extension is easy. To extend, you can mail a Form 4868, ask your return preparer, use commercial software, or do it yourself electronically. For more guidance, IRS tax topic 304 covers extensions of time to file your Tax return.
If you need an extension, give us a call. We are happy to file this form for you free of charge.
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Stephen Wallick started Stephen Wallick & Associates to provide tax and accounting services to Contractors, Real Estate Investors, and Realtors. Steve specializes in IRS Tax Resolution services and works with his clients to resolve cases under scrutiny by the IRS. As a tax professional and enrolled agent, Steve can save you money with IRS loopholes each year. With over 20 years going up against “The Man”, Steve is uniquely qualified to resolve even the toughest IRS cases.