Should You File for an Extension on Your 2020 Tax Return?

Each year, millions of taxpayers elect to apply for an automatic extension of their time to file income tax returns with the IRS. So long as an extension is requested on time, a taxpayer can have an extra six months—up to October 15—to file.

Taxpayers have many reasons for filing an extension. For some, finalizing a return by April 15 is simply inconvenient. For others, the extra few months allows time for complex matters to be resolved before completing the return.

How do income tax extensions work?

To request an extension of time to file a return, a taxpayer submits IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return on or before April 15. As the name indicates, the deadline extension is automatic provided Form 4868 is submitted by April 15. The form can be filed by mail, electronically, or with an estimated payment submitted through the IRS Direct Pay system. 

The tax preparers at Ferguson Timar will be happy to take care of this filing for you.

Bear in mind that an extension to file only applies to the return itself, not to any amounts that are due. Taxpayers who expect to owe taxes must estimate the amount they think they will owe and submit payment on or before April 15 to avoid late penalties. Once the final return is filed, you may need to submit an additional payment to cover a shortfall in your estimate, or request a refund for any overpayment.

Reasons for filing a tax extension

Before we get into the reasons why you might want to extend the deadline on your tax return this year, let’s address the reasons you would not want to extend. The most obvious reason to file taxes early is if you expect a refund—there’s no reason to leave your cash in the hands of the IRS any longer than is absolutely necessary. Even if you will owe something, you may prefer to have the filing behind you than to let it linger.

The benefit of time is the top reason to file an extension. Accuracy and completeness are valuable features in a tax return. If getting there will take extra time this year, don’t hesitate to request an extension. Time can be important for many reasons, including these:

  • Gathering documentation takes time. Sometimes gathering the necessary paperwork can be a lengthy process, especially if key records need to be obtained from employers or others. It is usually better to file once rather than having to file amendments later. An extension gives you time to pull everything together.
  • Life gets in the way. Sometimes a tax return needs to take a back seat to more urgent priorities. The birth of a new child, the death of a close family member, or a big move are all examples of events that can distract from taxes. Because extensions are automatic, taxpayers are free to use them when putting off a return is convenient.
  • Certain tax situations. Delaying the completion of a tax return can be important in certain circumstances. Most of these have to do with particular financial transactions where the timing of the filing may influence how the transaction is taxed. Taxpayers who have conducted unusual securities or real estate transactions should consult with their tax advisor to explore this question further.

Ferguson Timar is here to answer your 2020 tax questions

If you need an extension for filing your 2020 returns, getting one is easy. Getting your returns ready to file is where the work comes in. The professionals at Ferguson Timar are here to guide you through the tax season. Call us at (714) 204-0100 or send us an email to let us know how we can be of service.