There are lots of legitimate reasons why taxpayers need more time to file. One of the most common reasons is the situation where income does not come from a mere W-2. In addition to having self-employment income, you may own a business; it might be a pass through entity so you can’t start your returns until you receive the information from the business.
But there are other reasons: you could be a beneficiary of a trust or estate or a shareholder or partner in a pass through entity and just now getting your Schedule K-1. You might not have received your forms on time. You might still be waiting for a 1099-R. You might be funding an IRA and need to include that information on your form 1040. There are lots of reasons. You don’t need to tell anyone why you’re filing for extension – even the IRS. And it doesn’t (contrary to popular belief) increase your risk of audit or examination. Every year, about 7% of taxpayers file for a six-month extension. But you need to understand a few things.
Filing for an extension means you get an extension to file the paperwork. You must still pay what you estimate you owe, however. If you don’t pay on time, the IRS will charge you interest and maybe even penalties that could increase your tax bill by 25% or more.
Asking for an extension isn’t like college where you had to make your case (beg) your professor for more time to turn in your term paper. The IRS calls it an automatic extension for a reason: They will automatically grant it if you ask. Just don’t forget to ask!
If you don’t ask for an extension and don’t file on time, the IRS usually charges 5% of the taxes you owe each month your return is late, all the way up to 25%. If your return is more than 60 days late, the IRS will charge you a penalty of at least $135 or the entire balance of tax due on your return, whichever is smaller.
However, you might not owe the penalty if you have a reasonable explanation for filing late. Attach a statement to your return fully explaining the reason.
You may get extra time to file even without filing an extension. Are you: