The IRS does grant tax extensions readily for those who cannot afford to pay off their taxes or do not have all of the information that they need to file their taxes on time. At first glance, this appears to be a good idea. However, today we are discussing why tax extensions are not always good ideas.
Asking for a Tax Filing Extension Does Not Give You More Time to Pay
Despite the fact that the IRS has given you an extension for filing your taxes, they still expect you to send them payment by April 15th. If you do not do so, you will face interest and penalties. In addition, keep in mind if your estimation is lower than the actual amount of money due, you will still have to pay the interest and penalties on the remaining balance. It is suggested that when sending payment, you aim to over pay to avoid trouble down the line.
It Takes Longer to Receive Your Money
If you are someone who will be getting a refund, it is going to take you longer to receive your money. This simply does not make sense because Uncle Sam is keeping your interest free loan even longer and your bill collectors are wondering when they will receive the money that you owe them. Even if you do not have an immediate use for your money, you can put it in a savings account and gain interest on it yourself.
You Are Delaying the Inevitable
If you want a tax extension so you can procrastinate, you are only delaying what is going to happen anyways. The only way this is useful is if you actively work on fixing your problems during the six-month period and do not waste the time.
Closing Thoughts
The thought of asking for a tax extension can seem like a good idea for the moment. However, once you think about all of the cons that come along with doing so you may want to reconsider. One of the main reasons people delay is to procrastinate. However, during this time you have to be smart and get a safety net.
Overall, before asking for an extension make sure that you have no other options. The IRS handles finances seriously and you do not want to find yourself unable to maintain your lifestyle because you thought it was a good idea to delay filing your taxes.