Five Reasons to Wait to File Your Taxes
When tax season arrives, many taxpayers may feel compelled to complete their tax return as soon as possible. While there is a rationale for filing early, it can sometimes lead to mistakes that cost taxpayers significant time and expense, and compromise peace of mind. Instead preparing a return as quickly as possible, taxpayers should take the time necessary to complete an error-free tax return.
There are certainly some very valid reasons for filing early. Your refund, if you anticipate one, can be expected earlier. Completing a return may help your child receive student aid, in which case, earlier is better. Finally, an earlier filing decreases the possibility of falling victim to identity theft because it lessens the opportunity for others to file a fraudulent return under your name.
Reasons to Avoid Early Filing
Despite the foregoing reasons to file early, there are some valid reasons that it may be best to wait:
- Information - Waiting to file your taxes allows you to collect all relevant forms and statements before you file. Helping you to avoid filing with incomplete information.
- Amendments - When you sign your tax return it means that you believe it is truthful and complete, under the penalty of perjury. When filing in a hurry, if mistakes are made, it could require an amendment to be filled later on. You are required to amend all aspects of your return that are inaccurate, including items that are not in your favor. It is preferable to take your time in filing to prevent having to amend a return.
- Audits - An amended return has a considerably higher chance of being audited than an original return. Avoiding an IRS audit is top of mind for most taxpayers. Audits can consume considerable time and financial resources.
- Interest and penalties - If you amend your return, and it shows that you owe more taxes than you did for the original, the IRS may charge you interest on this amount. It may even assess a penalty.
In most years (more here), the tax deadline is April 15th, but the IRS allows taxpayers to start filing their return as early as January. While there are reasons to file early, an inaccurate return can cause trouble. For the reasons outlined above, avoid the temptation to file before you are ready.
4 Things to Know If You Can't File by Tax Day
It's better to file your tax return late than not at all. If filing late, you should try to do so as soon as possible. Here's what you need to know about filing your taxes at the absolute last minute (or later).
1. First, file for an extension as soon as possible.
You have until Tax Day (usually April 15th) to file for a six-month extension. If you owe taxes and don't make any payments, interest will still be added to your balance due, regardless of when you file your return. However, filing without an extension subjects you to failure to file penalties, which are far greater than those assessed on late payments. The longer you delay filing your taxes, the greater the failure to file fee may be.
2. See if you qualify for an automatic two-month extension for IRS-approved reasons.
If you are outside the continental United States for specific business reasons, then you may be granted an automatic two-month extension, giving you until June 15, 2021 to file. You must be living outside the United States, with your primary place of business located outside the country at your employer's request or convenience. If you are a government employee, your post must be outside the United States.
If you are an active duty military person stationed outside of the United States and Puerto Rico, you may also qualify for the automatic two-month extension.
3. You have until October (six months after the default deadline) to electronically file your tax return.
If you did not complete your return by the April 15th deadline, no matter if you filed for extension or not, you have until October 15th (6-months later) to electronically file your tax return. E-filing makes the tax process smoother and faster, with fewer opportunities for mistakes. If, however, you cannot complete your return by this time, you will need to proceed with filing a paper return.
4. Make a good faith effort to pay your taxes and include at least a small payment if you owe.
If you owe money to the IRS, you are not required to wait until you can pay the entire amount due. It is in your best interest to pay as much as you can afford, as soon as you can. Even if you can only pay a very small amount, it does show you are making a good faith effort to get your taxes paid as soon as possible.
Read more information on the penalties when owing back taxes.
Q&A: How do you electronically file a tax extension?
Federal tax returns for individuals are typically due on April 15th each year. If you're unable to file your taxes by the deadline, you can electronically file a tax extension using IRS form 4868. With this, you can receive an extension for up to six months and file your taxes anytime within that time frame and not be subject to failure-to-file fees, which can be quite costly.
The procedure for electronically filing this is often extremely quick and easy to do. The form itself requires basic information like your name, address, and social security number in addition to your estimated tax liability and any payments already made during the year. The most important part of the extension process is paying any owed tax balance by the April deadline. If you don't, you risk accruing a failure-to-pay penalty. The extension just gives you extra time to submit your paperwork, not extra time to pay your tax bill.