Tax Day is nearly two weeks away. And if you’re reading this post, you probably haven’t filed your 1040 yet. Well, thank goodness for tax extensions. Actually, let me retract that last statement. It’s not a good idea to opt out for a tax extension because there probably will be a price to pay.
John Gregory, a tax practitioner and founder of 1040Return.com, which provides tax solutions for small business owners and individuals, suggests five things you should take into account if you plan to file a tax extension with the IRS.
No. 1 - The Purpose of the Extension. Filing a tax extension gives you a grace period of six months, which pushes your deadline to October 15. However, there is a catch. The IRS allows you the extension for the sole purpose of arranging for and organizing your documents. Do not assume that you are getting an extension for paying off you tax liabilities. You still have to pay at least 90 percent of your taxes by April 15. If you are trying to buy time to put off your tax payment for six months, it won’t be a wise thing to do. The IRS will charge interest on the unpaid tax obligation. This means, you will have to shell out more money.