To Extend or Not to Extend – it is not even a question.

• March 13, 2023
• Patrick Smith

Co-Author – Matt Winans – Matt.Winans@claconnect.com

We would like to outline the benefits of extending your income tax return(s); regardless of whether it is an individual or business. We would also like to dispel myths about extending.

The facts:

1. An extension to file an income tax return is offered to individuals and businesses to allow for additional time to collect information so a complete and accurate return can be filed.
2. The extension does not change the timing of when the tax(es) is due and payable. An estimate of tax due needs to be calculated and paid on the original due date to avoid late payment penalties and interest.
3. Extending your return does NOT increase the risk of an audit by the IRS (Internal Revenue Service).
4. Extending is common and helps the IRS manage the deluge of returns that need to be processed.
5. Extending your return does not mean you have to wait to file the tax return. If you expect a refund, filing on or shortly after the original due date of the return makes sense. We are seeing an increase in corrected/amended 1099’s being sent to individuals; extending the return can help alleviate multiple filings and service costs.

The benefits:

1. New information is often discovered after the original due date of the return, for example, amended 1099’s from banks. Schedule(s) K-1 from various investments (these often are delivered after the original due date of the return).
2. Avoids compression during the filing season and the stresses of gathering all the relevant information necessary to file the return.
3. If the return was filed on or after the original due date and a change needs to be made, a ‘Superseding’ return can be filed prior to the extended due date, this will be considered an ‘Originally filed return.’
4. Elections! Many elections are required to be made on a timely filed return. Often, the definition of a timely filed return includes extensions! If an election is missed on a return that was extended, a superseding return could be utilized to perfect that election.
5. Amending Partnership returns can be complicated and costly! A company may file a superseding return prior to the extended due date, and it is considered an ‘originally filed’ return, avoiding the amendment process.
6. Tax law changes – the volatility of the political landscape and pace of tax law changes often lacks guidance and clarification(s). Information may surface later, requiring revisions or changes in response to the newly issued guidance.

In conclusion, “Extend is your Friend” its normal and does not create additional risk(s).

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