The 7 Signals You Need To File A Tax Extension

When tax time rolls around, it can be a confusing and stressful period for individuals and businesses alike. There are a number of documents to gather, calculations to be made from your paystubs, and filings to be completed. The last thing anyone wants is to face penalties from the IRS for filing their taxes late.

Fortunately, there is a way to buy yourself some extra time when it comes to completing your tax returns: filing for a tax extension. Tax extensions give you an additional six months to file your return, which can be a lifesaver if you’re struggling to get everything together on time.

So, how do you know if you need to file for a tax extension? And what are the signals that indicate you should do so?

In this article, we’ll take a look at seven signals that it might be time to file for an extension.

The Ins and Outs of Tax Extensions

Before delving into the specific signals that you should file for a tax extension, let’s first take a look at the basics of what tax extensions are and how they work.

In short, a tax extension is an extension of the time you have to file your taxes. Instead of having to submit your return by April 15th, you can file for a tax extension and have until October 15th to submit your return.

There are a few things to note about tax extensions:

  • They are not an excuse to avoid paying your taxes. You are still responsible for filing your taxes and paying any taxes that you owe by the deadline.
  • Filing for a tax extension does not mean that you will automatically be granted an extension. You still need to file for an extension and provide the IRS with a reason why you need more time.
  • There is no fee to file for a tax extension. So, if you’re struggling to get your taxes done on time, it’s worth filing for an extension rather than risking penalties from the IRS.

Now that we’ve covered the basics of tax extensions, let’s take a look at seven signals that you may need to file for an extension.

1. You Haven’t Started Your Taxes Yet

Years move incredibly quickly, especially if you are a busy person. If you haven’t started gathering your documents yet when April rolls around, it might be time to file for a tax extension, and this will give you extra time to get sorted.

Remember: you still need to pay any taxes that you owe by the deadline, even if you file for a tax extension. So, make sure to get started on your taxes as soon as possible so that you don’t incur any penalties from the IRS.

2. You’re Not Familiar With The Tax Code

Taxes can be confusing – not just for young people, but for everyone. The tax code is constantly changing, and it can be difficult to keep track of all the changes. If you’re feeling overwhelmed by the task of completing your taxes, it might be time to file for a tax extension.

3. You’re Struggling to Gather All of Your Documents

Too many documents to keep track of? Not sure what you need to bring to your tax preparer? If you’re feeling overwhelmed by the task of gathering all of your documents, it might be time to file for a tax extension.

With an extension, you'll be able to give yourself more time to gather all of your documents and complete your taxes. Make sure your employers generate a W-2 form for you and check that you've got the following documents: 

  • 1099s from any contractors you've paid during the year
  • Social Security Card or Individual Taxpayer Identification Number (ITIN)
  • Bank account and routing numbers for direct deposit of your refund
  • Records of any estimated tax payments you made during the year
  • Receipts for any deductible expenses

4. You’re Having Trouble Calculating Your Taxes

Accountants and tax preparers can charge a lot of money to help you with your taxes. If you have decided to organize things yourself, perhaps you are in over your head with the calculations.

Filing for a tax extension can be a good way to buy yourself some extra time when it comes to completing your taxes. However, it is certainly worth your time to invest in tax preparation software or to find an accountant who can help you get your taxes done on time.

5. You’re Experiencing Major Life Changes

Tax is highly dependent on your living situation. For instance, if you have children, you can claim them as dependents which will change what tax form you fill out. 

A few life changes that may influence your tax include:

  • Marriage or divorce
  • Buying a home or selling a home
  • Having a baby or adopting a child
  • Starting or ending a business
  • Getting paid in cash

If you’re going through a major life change – such as getting married, divorced, or buying a home – it might be time to file for a tax extension. This will give you more time to gather the documents you need and complete your taxes.

6. You Have Been Deployed with the Military

If you are in the military and have been deployed overseas, it's obviously going to be difficult to file your taxes on time. The IRS offers an automatic extension for military members who are serving in a combat zone or participating in certain operations.

7. You've Never Paid Taxes Before

There are a number of reasons why you might not have experience in paying taxes. You may be a student, you may have just started working, or you may have recently moved to the United States. If this is your first time filing taxes, it's perfectly understandable to feel overwhelmed and uncertain about what to do.

In this case, it's best to file for a tax extension so that you can make doubly sure that you're doing everything correctly. Even if you have everything ready on time, filing for an extension in advance gives you a backup in case something unexpected comes up.

If you are new to taxes, here is a checklist of details you'll need:

  • Your Social Security number or Individual Taxpayer Identification Number (ITIN) 
  • The total amount of money you made during the year 
  • W-2 forms from any employers you worked for during the year 
  • Records of any estimated tax payments you made during the year 
  • Receipts for any deductible expenses 
  • Bank account and routing numbers for direct deposit of your refund 
  • Your driver's license or State ID number

Remember to provide necessary documents to other people you've had dealings with. If you paid any contractors or freelancers, for instance, you'll need to generate a 1099 form for them.

Conclusion

These seven signals are clear indicators that you may need to file for a tax extension. If you are experiencing any of these issues, it is best to file for an extension so that you can avoid any penalties from the IRS.

Extensions are perfectly normal and are often used by people who are struggling to get their taxes done on time. So, don't be afraid to file for an extension if you need more time – the IRS understands that tax season can be stressful.