Getting an extension on filing your tax returns is so easy that many people do it as a matter of course, regardless of whether they actually need additional time. Once mid-April has come and gone, it can be tempting just to sit on your tax return throughout the spring and summer months, only buckling down once the extended mid-October absolute deadline comes around. However, there are some good reasons, even if you've gotten an extension, you should go ahead and get your taxes filed as soon as possible. Below, we'll run through several of them.
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Because you don't want to wait for your refund
The most obvious benefit of filing your tax returns as early as possible is that if you're owed a refund by the IRS, filing your return is the last step you need to take in order to claim it. Because the penalties for failing to file are based on a percentage of the amount of taxes you owe, those who are due refunds technically won't have to pay anything even if they miss the extended mid-October deadline. With a three-year statute of limitations that runs from the original due date of the return, those who haven't filed their 2015 tax returns yet will have until April 2019 to get them in and claim a refund.
The longer you wait to file, the longer you're giving the IRS an interest-free loan of your hard-earned money. If getting that cash back in your pocket before October would have value for you, then that can be a powerful incentive to get your returns completed sooner rather than later.
Because you don't want to pay interest and penalties
Many people mistakenly assume that if they file for an extension, then they won't have to pay any interest or penalties related to their tax returns. It's true that getting an extension will prevent you from having to pay penalties related to a failure to file a timely return, because the extension requests makes it so the clock won't start on failure-to-file penalties until mid-October.
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However, even if you got an extension for filing your taxes, you still have an obligation to pay your taxes by mid-April. If you don't, you'll owe failure-to-pay penalties, which amount to 0.5% of your outstanding tax liability per month, or part of a month that you're late. In addition, interest on what you should have paid in mid-April will also accrue. For instance, if you owe $5,000 in taxes, then you'll pay $25 per month in failure-to-file penalties and will also owe interest charged at an annual rate of 4%, which works out to about another $17 per month. That's not a huge amount, but it's still a good incentive to get your returns in.
Because procrastinating got you into this mess in the first place
For many people, it's human nature to wait until the last minute to do things. Part of the reason millions of taxpayers get extensions in the first place is because they didn't do anything until the last few days before the April deadline and found that they couldn't get everything done in time.
Once you have an extension, it's all too easy to let history repeat and let things go until the last few days before the October deadline. Without the ability to get further extensions, making that mistake twice won't have an easy solution. It's far smarter to bite the bullet and get your returns done once and for all.
Getting an extension is a smart move when you know you won't be able to finish your returns by the April deadline. However, don't automatically wait to file until the final October deadline approaches. For most people, at least one of these reasons should be motivating enough to get you to finish your return and get it into the IRS before autumn arrives.
The article Got an Extension? Don't Wait to Finish Your Taxes originally appeared on Fool.com.
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