For the second year in a row, the tax deadline has been pushed back. This time around, your 2020 federal tax return is due on May 17th. Some states have also extended their tax deadline to give filers extra breathing room. However, the IRS suggests you file right now if you’re expecting a refund. Taxpayers who need additional time to file, can easily request a tax filing extension. But is it a good idea? Here are some pros and cons.
Pro: It’s easy and automatic
Getting a filing extension takes very minimal effort. Simply fill out Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return and send it to the IRS by May 17th. This will give you until October 15, 2021 to file your return. Please note, if you’re self-employed, you must still make your first quarter estimated tax payment by April 15th.
Pro: Extra time to track down missing forms and receipts
You can’t file an accurate return without having all the necessary information. If you’re missing receipts or still waiting for your W-2, you better get moving. Start by contacting your employer. Ask for another copy of your W-2 and verify the mailing address they have on file. If the business has closed or they’re being uncooperative, call the IRS for a substitute copy. They can be reached at 1-800-829-1040. As you can imagine, this is a very busy time for them so be patient. As a last resort, you can use Form 4852, Substitute for Form W-2, Wage and Tax Statement, and estimate your wages and tax withheld. Using your last pay stub of 2020 can help. If you get a copy of the missing W-2 after you’ve filed, you can always amend your return using Form 1040-X.
Pro: You’ll avoid the late filing penalty
If you file an extension and submit your tax return by the October 15th deadline, you’ll avoid the late filing penalty. Normally, if you owe the IRS and miss the tax deadline, you’ll be penalized 5% of your unpaid taxes for each month it’s late. Once your return is 60 days past the due date, the minimum penalty jumps to $435 or 100% of your unpaid taxes, whichever amount is lower.
Con: Your payment is still due on May 17th
More than likely you want an extension because you owe the IRS money and can’t afford to pay right now. Unfortunately, a tax extension doesn’t give you more time to pay. As soon as you miss the May 17th deadline, you’ll begin accumulating penalties and interest. The penalty starts at 0.5% of your unpaid taxes each month it’s late and can climb to 25%.
Con: Waiting won’t make the process any easier
Putting off your taxes for a few weeks or months won’t make filing any easier. There’s a good chance you’ll just wait until the last-minute and start scrambling again. The key to a stress-free return is being organized and using tax software. Track down all your tax forms, social security numbers, receipts and bank information, then use ezTaxReturn to prepare your return. Whether your situation is simple or complex, they’ll make doing your taxes fast and easy. You’ll receive clear instructions and step-by-step guidance throughout the whole process. So, don’t wait, file your taxes now.