Well, April 15 is here. Accordingly one of two things are about to happen -- either you are filing your federal and state income tax returns or you may be preparing to file an extension for filing your taxes. If you are you one of the many people getting ready to file an extension for your tax return, there are several considerations that you should take into account. Check out the common situations below that lead to folks filing extensions, and what you should know:
- You don't have all your tax information. This is probably the best reason to file an extension. The IRS realizes that life happens and some taxpayers may have lost paperwork, been out of the country or incapacitated during the tax season and don't have all the necessary paperwork together, or they are waiting on tax statements from a business or investments that use a non-traditional fiscal year, such as May 1 through April 30. If this is the case, start your tax return using all the information you have and estimate your income, or loss, from the missing statements to get a clear idea of your tax bill this year. Don't forget to pay at least 90 percent of the expected balance due with your extension to avoid penalties.
1. Computer matching of all W-2s and 1099s against the income reported on your tax return,
2. An error on your tax return,
3. Random computer pick of your tax return.
So filing late, early, or even on the last day will not affect your chances of an audit. Instead make sure you have all your income reported on the tax return, you have good support for all of your deductions and credits, and the names and Social Security numbers are correct.
We've covered the best reasons to extend, the worst and the reasons in between. No matter what you decide to do, remember to pay your taxes on April 15. The cost of ignoring a balance due to the IRS is high and just not worth it. There is still plenty of time to file your tax return and plenty of help if you want to get it. If you are reading this AFTER April 15th and you did not get to your extension in time, file and pay as soon as you can and watch for my future piece on what to do if you get an IRS notice.