As April 15th approaches, taxpayers may rush to try and complete their returns, missing out on key opportunities for planning and strategy. While it’s ideal to file your return by the IRS due date when you have all the information, there are many instances that prevent this, such as taxpayers with K-1s from pass through entities. In many cases, K-1s from pass through entities are not received until well after the deadline or right before it.
We recently experienced a situation where a client, whose information was received too close to the deadline, did not want to file an extension. After speaking with one of our professionals, the client understood their unique situation and agreed to extend. After April 15th, we discovered that the client had not provided information on an $80,000 deduction! Without time for an accurate review, this deduction could have been missed.
Extending your return allows for the appropriate amount of time to plan for and prepare your return. If you find yourself in this scenario, it’s always better to extend your return.
Extending your return does not require that you have all the information to complete your return. Instead, you need enough key information to estimate your tax liability. Any payments due to the IRS are still due regardless of whether you extend.
Many taxpayers are concerned that an extension will increase their risk of an IRS audit. While there isn’t a direct correlation between extensions and audits, there is an increased risk of being audited if the taxpayer rushes to file a return by the deadline only to have to file an amended return at a later date. The best reason to go on extension is if you need time to consider proper reporting, get professional advice, and file an accurate return. Amended returns are more likely to be scrutinized, so file once accurately if possible. Filing a return without complete information can result in needing to amend your return, which always incurs additional fees.
It’s our goal to help clients make the right decision around extending versus filing. If you have questions about which is best for you, please contact us.
Furthermore, please note that any returns received after March 15th of this year will automatically be extended due to commitments we have already made to other clients whose information we have already received.
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