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To seek extension, or not to seek extension? That is the question.

It is a busy time of year for accountants – while our annual timeline builds up to tax season, it can often creep up on filers. So here are important deadlines to remember and a question to consider: should I seek an extension?  The deadline to file business taxes is March 15, 2020 and for personal taxes it is April 15, 2020. You should already be working with your tax specialist to make end-of-year contributions to your retirement and education accounts and gathering all last minute needed documents for submission. We ask that you provide all paperwork to us 30 days before those deadlines. If that seems unmanageable, perhaps filing an extension is right for you? We’ll break down the pros and cons. 

The Pros  

  • If you’re cutting the deadline close, late penalties are avoided or reduced if you file an extension.
  • If you’re a (very) late filer, there is actually a three-year deadline for receiving a refund check from the IRS. If you file an extension, the statute of limitations is also extended by an additional six months.
  • Self-employed have more time to fund retirement plans.
  • If you are scrambling at the filing deadline, seeking an extension can also improve organization, avoid mistakes and ultimately improve accuracy.

The Cons

  • While the extra time avoids late filing penalties, it does not allow you more time to pay. If you owe the IRS, you will still be charged a late payment penalty of 0.5 percent per month and interest.
  • Contributions to traditional IRAs and Roth IRAs are still due by the original April deadline.
  • The extension does not allow for last minute filing changes, such as switching from joint to separate returns (if married) or to make Mark-to-Market Elections (for professional traders).

Please note: if you plan to file with an extension and believe you will owe money, please let us know by April 1,2020 and provide as much information to help estimate what your extension payment should be.