Every tax season comes with clients who opt to file an extension. When you help them do so, you may have to correct some common misconceptions about extensions or, at the very least, remind them how the process works. Here are nine reminders to make sure they’re informed and prepared to handle their extension correctly.
The IRS grants extensions automatically
Your clients may worry that their reason for needing an extension isn’t “good enough” and that, as a result, the IRS will deny their request. Make sure they know that the IRS grants extensions automatically as long as Form 4868 is filled out correctly and filed on time.
Extensions don’t grant extra time to pay
One of the most common reasons someone might seek an extension is also one of the toughest – they can’t pay their tax liability. While filing an extension will allow your client to avoid late filing fees, it won’t help them avoid a late payment fee. When they file, they’ll also be subject to interest on the outstanding tax liability. If the only reason they want the extension is to have more time to pay, it’s best to file by the normal deadline and set up a payment plan with the IRS.
Extensions are better than incorrect returns
If your client is waiting on late information forms (such as W-2s,1099s, or K-1s) or rushing to gather documents, requesting an extension makes sense. While they should usually receive these forms by January 31, it’s not unusual for them to be sent later since employers and institutions can request extensions to complete these forms. Additionally, clients with complicated returns may need extra time to ensure accuracy or tax plan effectively.
Some states require a separate extension request
Your clients may assume that getting an extension from the IRS will also automatically get them an extension for their state tax return. While this is the case in some states, others require you to file a separate extension request with the state itself. Be sure to know your state’s laws and ask if your client will need to file state income taxes for multiple states.
Clients should know if they owe
Even with an extension, it’s still best to determine your client’s tax liability as soon as possible so they can avoid interest and penalties. Use The TaxSlayer Pro Professional Tax Refund Calculator to quickly estimate a client’s refund or amount due, allowing them to pay the IRS as soon as possible if necessary.
Even if a refund is expected, it’s still wise to request an extension
If your client won’t be able to file on time but thinks they’ll be getting a refund, they may not see the value in requesting an extension. However, requesting an extension is so quick and easy that there’s no reason not to. If they do end up owing taxes, their extension protects them from failure-to-file penalties.
Extensions don’t increase audit risk
There’s a misconception that extensions increase the risk of a return being flagged for an audit. There’s no validity to this rumor, so reassure any concerned, extension-filing clients that they aren’t setting themselves up for an IRS audit.
Victims in FEMA Disaster Areas can request extensions after the deadline
In most cases, you must file your extension request by the tax deadline, usually April 15. But if your area was subject to a FEMA Declared Disaster during the year, the IRS may grant an extension even after the deadline. However, you’ll need to print and mail Form 4868 as it can’t be processed electronically after the deadline.
Their new filing deadline is October 15
Of course, extensions only last so long, and your clients still need to file their returns before their new deadline. Most years, that’s October 15 or the next closest business day if October 15 falls on a weekend.
This article was last updated on 12/22/2022.