Clarifying Confusion Around Tax Extensions


Over the years I have answered many questions about tax extensions. There is a lot of misunderstanding about them, so I want to shed some positive light on it.

First off, what is an extension?

It’s an extension of time (six months) to file your federal income tax return. Keep in mind that your taxes owed still need to be paid by 4/15.

Why do we file tax extensions?

The #1 reason we file extensions is to avoid the failure-to-file penalty. This is one of the more severe penalties the IRS can assess at 5% of your taxes owed every month your return is late. Filing an extension avoids this penalty, which is why our firm’s policy is to file for everyone.

I already signed my tax return or plan to sign before 4/15.

We submit returns every day leading up to 4/15. But, as we get closer to the deadline, the risk of IRS and software server issues increases. Extensions are insurance against worst case scenarios. It does not imply we are delaying submitting your tax return.

We will file an extension even if you have a refund, make an extension payment (automatic extension), or file your own extension. There’s zero risk to filing multiple extensions.

Other Benefits to Filing an Extension

  • It’s easy and we don’t charge extra fees for filing.
  • Less anxiety around filing. You have up to six more months to gather your documents, review your return in detail, and file.
  • Business owners have six extra months to contribute to certain retirements plans.
  • You have 3 years from your filing deadline to amend and claim a refund.
    • With an extension your filing deadline is 10/15/20**
    • Without an extension your filing deadline is 4/15/20**
  • Instead of amending, you can file a superseded tax return if you receive more documents.
    • A superseded tax return replaces your original return. This reduces processing times and is not subject to more scrutiny.
    • An amended tax return requires extra processing time and is subject to more scrutiny.
  • In rare instances, Congress passes tax during the year that applies changes.

Myth: Filing a tax extension increases IRS scrutiny.

If an extension has any weight, it’s to your advantage. Filing indicates you’re taking extra time to prepare and review your return. Most fraud occurs within the first few weeks of tax season. Thieves using stolen credentials will file before taxpayers have received their documents. This is a period of extra scrutiny for all returns filed.