Pros and Cons of Filing for a Tax Extension

Everybody's favorite part of business ownership, paying taxes! Yeah right! Sometimes, the deadline just sneaks up on us, so much that over 12 million people filed for extensions this year!

But, is filing for an extension the right way to go? If you think you're going to go past the initial deadline, let's talk about the pros and cons of filing for an extension.

Benefits Of Filing For An Extension

There are a few benefits of filing for an extension before the tax deadline. The goal is to have a plan. If you know you will not make the deadline or you’re just feeling stressed or rushed over hitting the deadline we recommend filing for that extension. As just having that plan & filing for the extension ahead of time could possibly save you money in the long term. 

Avoiding Late Fees

If you don't file for the extension but still miss the payment deadline, you'll be required to pay a fee of 5% after each month of the total tax that you owe for the fiscal year. When that number is in the thousands, that adds up to a substantial fee. However, if you pay within the extended window, there won't be any penalty.

Give You More time

Of course, if you file for the extension, you're buying yourself more time to pay the taxes, but you're also pushing back other deadlines like retirement contribution deadlines. These can offer you significant deductions on the amount you owe, so take advantage of them if you can.

It will also give you more time to get your taxes right, including maximizing your deductions and doing your best to avoid an audit.

Risks Of Filing For An Extension

Risks are inevitable especially if you file for an extension. The good with the bad so to speak. As previously mentioned, while there is no financial penalty for filing an extension it still may not be the best route to go when it involves your business taxes and or your initial tax process. If you want a solid example of a process that has proven to be successful, please click here to view CORE’s  tax process. So, what are some of those pesky risks? Continue reading below. 

Too Long Of An Extension

If paying your taxes stays on your to-do list for 5 months, This can go one of two ways. 1.It can feel as if you have all the time in the world to prepare, creating procrastination or 2. Having that added time can create unnecessary stress. So, of course paying on time is a good way to get it off your shoulders.

Lastly, filing an extension could cut into the time you could be spending to save for next year's tax deadline, which could lead to an endless cycle of filing extensions every year.

Delaying Your Refund

If you wind up being owed a tax refund, the longer you wait, the longer that money sits there. If you crunch the numbers ahead of time and get a rough idea of what you'll owe or what you're owed, that can give you a good sense of whether or not to file an extension.

Need Help Filing?

If you're planning on filing for an extension or simply just filing your taxes, you may need a hand! Core of course can help! Taxes are the last thing business owners and self-employed individuals want to be worrying about, so stay up to date with Core’s latest news via social media and contact us to see how we can help!