The Misunderstood Tax Filing Extension

With all of the misconceptions swirling around what it means to “file a tax extension” it’s not surprising that most taxpayers will do just about anything to avoid it. Many people think that filing an extension will raise a red flag to the IRS and as a result make themselves more vulnerable to the dreaded audit. Rest assured – there is no evidence that this is the case.  The IRS has never given any indication that they are more apt to perform an audit on taxpayers that submit extensions and there is no research that has been done to support that theory.

In actuality, extensions can be a very wise course of action! Robert W. Wood has penned a very compelling argument for the “upside” of tax extensions in a recent article for Forbes magazine:

• The extension form is simple to complete. Note that you will need your income information to determine if any money is owed at the time of the extension.
• The extension provides 6 months to ensure that your tax return is accurate and complete.
• Extensions are automatic. The IRS does not have to approve your extension.
• Extensions allow for corrected Forms 1099 and K-1. Extensions make it less likely that you will be surprised by a tardy or corrected K-1 or 1099. You may as well file once and file correctly.

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Davis & Hodgdon Associates CPAs is a full-service public accounting firm with offices in Williston and Rutland Vermont. The firm is a member of Vermont Businesses for Social Responsibility (VBSR), Vermont Business Environmental Partnership (VBEP), Lake Champlain Regional Chamber of Commerce (LCRCC), Vermont Chamber of Commerce, and Women Business Owners Network (WBON).  The firm serves its clients by providing progressive, proactive services through expert staff, sophisticated technology, and unparalleled efficiency.