I’ve written about this topic in the past but as tax day approaches, I often get questions about filing an extension and what that means. I talked to a client on this very subject earlier this week so let’s recap.

What is a tax extension?

Tax returns for the previous tax year are due on April 15th of the following year (you may get a few extra days if that falls on a weekend or holiday!). However, as tax returns have gotten more complex and involved, the IRS realizes some individuals may need more time to complete their return. As a result, there is an ability to file for an extension to push your the due date of your return by up to 6 months (resulting in a new due date of October 15th).

Is there a fee to extend?

No. There is no charge or penalty if you need to extend (provided you make the required payments on time – see more below)

Why would you need to file an extension?

Extensions can be filed for many reasons – and you don’t need to tell the IRS that reason. You simply file a form (and make your payment – see below). In recent years, as the workload on tax advisors increases, extensions are commonly filed to give tax advisors more time to get all client returns done properly. Extensions can also be required if clients don’t give their tax advisors their information on time (I’ve seen many require everything to be sent in by the end of February or an extension will be automatically required). If you file your own return, you may be traveling during the time of return prep and wish to do it when you are back home. Another common reason is that some information needed for a return (like a K1 on a private investment or partnership) won’t be provided until after the April due date.

Does an extension mean I don’t have to pay?

No. You still have to pay your balance due by April 15th even if you extend your return filing. How do you know what to pay if your return isn’t completed? If you work with a tax advisor, they will calculate this amount for you (perhaps combining it with your Q1 2025 estimated payment). Typically, some “cushion” is added to estimated payments to avoid any underpayment penalties (which would result if actual taxes owed on final filed return exceed estimated payments for the year, including your extension payment). Any excess payment could be applied to the following tax year or refunded (just please note that refunds will not be issued until the return is actually filed).

With tax day just a few weeks away, it’s a good time to evaluate if you need to file an extension and if so, to start that process with your tax advisor (or yourself) in the near future. Happy tax prep to you all!