Should You Request a Tax Extension?
Federal income tax returns for 2022 are due by April 18th, but getting an extension until October generally isn’t difficult (Kiplinger lays out the process of requesting an extension here). You’ll still need to pay an estimated amount of due taxes by April 18th, but the filing of the official tax return and finalized amounts can be pushed back. The entire process is fairly simple, but whether or not you should request an extension is up to you. Here are some pros and cons to pushing your tax date back by 6 months.
Pro: More Time, Less Mistakes
Sometimes things just don’t work out and you may not be able to get your taxes filed by the April 18th deadline. Maybe you’ve been ill, maybe this past year has been unique financially and you’re still trying to figure it all out, or maybe you just can’t be bothered to deal with this right now. That’s okay! Taking the extension will allow you to get whatever you need settled and might even allow for more time to find tax breaks and increase your return.
Con: More Time, More Worrying
If you don’t need to file an extension, just get your taxes taken care of! Why add 6 more months of thinking about your taxes only for it to roll back around in another 6 months. Unless you have to file an extension, get your taxes done and give yourself a year-long break from thinking about anything tax-return related (aside from being proactive in your book-keeping).
Pro: Potential Savings
Tax season is when tax preparers are charging their highest prices and are at their busiest. Fees typically fall later in the year as the extended deadline comes into play which can lead to some savings depending on how complex your return process ends up being.
Get quotes from a few professionals before making your final decision, but be weary of preparers who base their rates on a percentage of your tax refund.
Con: No Extensions On Paying Up
Filing an extension for your tax return doesn’t exempt you from paying your estimated due taxes by the original deadline of April 18th. If you don’t, the IRS can charge you interest and penalties/fees for late payment.
If for whatever reason you’re financially unable to pay the taxes owed, payment plans and other options like taking out a loan or making an Offer in Compromise exist to ease the immediate tax burden.
Pro: More Time to Build Retirement Accounts
Filing an extension also gives you more time to contribute to accounts like Solo 401(k)s and Simplified Employee Pension (SEP) IRAs. And if during 2022 you exceeded your IRA contribution limits, an extension gives you 6 more months to withdraw excess funds and avoid penalties.
Con: You Might Need a Completed Tax Return
Things like mortgages, loans, and misc. government benefits might require a completed tax return to move forward. Deciding whether or not delaying these applications along with your tax returns will work for you is important to consider.
Tax season is a great time to look over your current financial situation and begin to prepare for the year(s) ahead. To schedule a complimentary financial review with Moore’s Wealth Management, click here or call our office at 770-535-5000, where a staff-member is awaiting your call Monday through Friday, 9AM to 5PM.
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