A tax extension grants you an additional six months to file your taxes. You’ll have more time to gather your documentation, file your forms and enlist a tax pro if necessary.
Filing an extension doesn’t increase your audit risk. Depending on your return, filing an extension may actually lower your audit risk, especially if you take the extra time to double-check all the information you provide on your return. Most audits stem from incomplete, inaccurate or missing information on tax returns.
At the same time, an extension could increase your overall tax liability. If you’re not able to pay your tax bill by April 15, you’ll begin to accrue interest and penalties on the balance until it is paid in full. If you find your tax bill to be beyond your reach, you do have the option of consulting with a tax advisor who can inform you of your options and possibly negotiate with the IRS on your behalf.
If you suspect you can’t file by the April 15 deadline, it’s still a good idea to estimate how much you’ll owe in taxes and to pay the balance on or before the April 15 deadline. You won’t have to hassle with late fees or penalties and you can concentrate on filing for your extension and gathering the needed documentation so you can file your return before the extension expires.
No one likes the thought of facing an audit, but you most likely won’t face an increased audit risk if you file an extension. While you’ll face late fees and penalties on your tax bill if you don’t pay by the April 15 deadline, an extension in and of itself won’t trigger an audit.
Just remember to provide all the requested information on both your extension request and your tax return, and double-check your figures for accuracy before filing your return. In terms of audit risk, it’s much better to have an accurate extended return than an incomplete or inaccurate return filed quickly on April 15.