If you’re used to meeting deadlines, you may feel guilty if you get an automatic reprieve. Don’t. There’s no shame in an extension. Millions are processed every year. Everyone with an April 15 deadline can get six extra months by filing (electronically or by mail) a tiny form that doesn’t even require a signature. Of course, the extension is to file, not to pay.
Use the time to gather records, consider reporting alternatives and get professional advice. After all, You File Taxes Under Penalties Of Perjury, They’re Not An Opening Offer. File accurately so you don’t have to amend later. Amending almost always increases audit risk. Sure, the IRS Respects Some Do-Overs. But isn’t virtually any do-over more noticeable than the initial try?
Although there are times you may want to amend, use amended returns sparingly. Amended returns are much more likely to be scrutinized. See 5 Simple Rules to Follow When Amending Your Tax Return. File once correctly so you don’t have to do it again.
Extensions used to be four months, with two more if you had a good reason. Now automatic extensions are six months. Once again, not that the extension is to file, not to pay. Make your payment and use the time to make your return accurate and complete. The payment is just a lump sum, and doesn’t characterize anything. You aren’t taking a tax return position in that payment.
You may be waiting for Forms K-1, gathering documents or seeking professional advice. If there are debatable points on your return–such as whether a lawsuit recovery is ordinary or capital–get some professional advice. See Don’t Fail To Consider Taxes When Settling Litigation.
To extend, you can mail a Form 4868, ask your return preparer, use TurboTax or other commercial software, or do it yourself electronically. Go to IRS.gov and click: Application for Automatic Extension of Time To File U.S. Individual. For more IRS guidance, see IRS Tax Topic 304 Extensions of Time to File Your Tax Return.
And what about audit risk? Do you increase audit risk by going on extension? Many taxpayers worry about IRS audit risk. Opinions vary and there are many old wives tales about what triggers an audit. So does going on extension increase your audit risk?
Probably not, but opinions vary. In fact, you might even reduce your audit risk by an extension. See Does Going On Return Filing Extension Increase IRS Audit Risk? There’s no proof for either view.
The IRS releases data about audit rates based on income levels and types of tax returns. They do not, however, release data about whether going on extension increases or decreases your chances. Just go on extension if you need the time. If it means your return when filed is more solid, it might even reduce your audit risk too.
You can reach me at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.
via The Tax Lawyer http://ift.tt/1kI030t