If you're coming late to this article in April, they're due very soon. But assuming you are reading this in March 2016, you still have time to put off doing your taxes or you have extra time to work on them. In fact, this year, because the filing date is on April 18 instead of the usual April 15, you have one additional weekend to stress and sweat over your taxes.
For some people, filing is a breeze. But if preparing your taxes feels overwhelming and is getting you down, you're probably considering filing an extension with the Internal Revenue Service. That would mean you could file as late as Oct. 17, 2016 (typically Oct. 15, but this year, Oct. 15 falls on a Saturday). But is filing an extension on your taxes really smart? Or are you just delaying the inevitable?
Maybe – and yes. In case you're wondering if you should file a tax extension, here are several reasons to consider doing so.
You don't have all of the paperwork or numbers that you need. This is the most common scenario in which someone would file an extension, experts say.
"If you don't have all the information to file the return completely and accurately, you should wait," says John Petosa, a licensed certified public accountant who teaches accounting at Syracuse University in New York. "The primary way that a person is audited either via a letter or in person is because the information on their return fails to match a 1099, W-2 or some other information form that was filed with the IRS using the taxpayer's Social Security number. Making sure you have all the information in your return is a wise reason to extend the return."
View the best ways to avoid a tax audit:
How to avoid a tax audit
6 reasons to file a tax extension
Double check your figures to assure there are no mistakes
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Be sure to be 100% honest, and report your numbers realistically
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Those in the highest and lowest income brackets are most often targets of fraud, and thus, audits
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Don't draw too much attention with unusual or unrealistic deductions
You're a serious investor. When you invest a lot, the result is a lot of tax-related paperwork.
Megan Kuchan, a certified public accountant at Clark Nuber PS in Bellevue, Washington, says there are three reasons her taxpaying clients often get an extension.
You're investing in hedge funds. "As more taxpayers invest in hedge funds or other complex entities, we're seeing more taxpayers extend their returns," Kuchan says. "These partnership structures usually extend their own return, providing investors with Schedule K-1 information sometime during the summer. This information needs to be included in the taxpayer's return, so they typically extend their return."
You have a lot of money overseas. "Taxpayers with foreign investments may have difficulty receiving the required information by the original deadline," Kuchan says, adding that in that case, many people will extend their returns to get the proper information from foreign jurisdictions.
You have no choice – your broker sent you incorrect information. "Many taxpayers receive original Form 1099s from their brokers related to interest, dividends or capital gain or loss by the end of February," Kuchan says. "However, brokers may end up providing corrected Form 1099s later in the year, resulting in taxpayers potentially needing to file amended returns."
You're self-employed. This isn't an automatic reason to file an extension. But sometimes all the paperwork a business owner needs hasn't come in by mid-April, says Steven Warren, a CPA with Lehrman, Flom & Co. in Minneapolis.
"For example, if the taxpayer is an owner in a pass-through entity such as an S corporation, a partnership or certain types of limited-liability companies, they may not get their Schedule K-1 until after the original filing due date," Warren says.
Ah, yes, that pesky Schedule K-1 again. Warren adds that the Schedule K-1 can often lead to tax filing extensions for beneficiaries of trusts and estates.
So why not file the return on time and then file an amended return once the final tax information comes in the mail? Kaitlin Krozel, a CPA in Scottsdale, Arizona, says many of her clients ask that question.
"I always recommend against this because it creates more work on my end, which means more fees for them," Krozel says.
If you need extra time to try and reduce your tax liability. If you're in a high tax bracket, and you're paying a CPA to not only file your taxes correctly but not overpay on your taxes, then, yes, you may be a good candidate to file an extension.
"The extra time can help you with tax planning," Warren says. "Because you are further into the current year without having filed the prior year's tax returns, you will have a better idea of whether you should carryback a net operating loss."
Why is that important? "Because you will not be able to utilize it currently or elect to forgo the carryback because you are having a big income year, and you may be better off reducing your current year's tax liability," Warren says.
You recently moved overseas. You think the American tax system is complicated? Try being an American living and working abroad.
"My firm works with a lot of taxpayers who live overseas – expats – and they have a special extension to file if it is the first year they are filing since moving overseas. It is Form 2350," Krozel says.
If you've recently moved overseas, you may not need to file an extension, but you may want the extra time to file if you haven't yet qualified for the foreign earned income exclusion, which can reduce what you pay in taxes significantly. According to the IRS website, "For tax year 2015, the maximum foreign earned income exclusion is up to $100,800 per qualifying person."
You're a procrastinator. You knew this point was coming, didn't you? Yes, being disorganized or delaying tasks is a good argument for filing an extension. Despite your knowing April was coming since last April (and, hey, we aren't judging), if you are now trying to get your taxes done at warp speed, there's a good argument that you should file an extension.
"Rushing to avoid an extension could make for incomplete and erroneous tax returns," Warren says. "It's generally better to wait and get it right when rushing could lead to mistakes."
Copyright 2015 U.S. News & World Report
RELATED: 10 strangest ways states tax you
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To preserve the uniqueness of their island paradise, Hawaii since 2004 has had an "Exceptional Tree" tax allowance. Landowners can deduct up to $3,000 from their income for expenses such as pruning and fertilization for any tree designated as rare, big, old or a combination thereof. That's per tree. Top-bracket earners taxed at the state's highest rate (11 percent) would save $330 via the deduction. The work must be done by a certified arborist, and the deduction can be claimed only every third year. Hawaii has had a list of "Exceptional Trees" since 1975, and there are now estimated to be more than a thousand thus designated.
Maine legislators tax anyone who deals in their official state fruit-blueberries, at the rate of 1.5 cents per pound. The resulting revenues-more than $1.6 million to state coffers in the fiscal year that ended in June 2013-are used to promote the crop and agricultural research.
The state also taxes harvesters and processors of hard-shell clams (known in the state as mahogany quahogs) at $1.25 a bushel, but state revenues for that are much lower.
Alabama is the last in the union to tax a deck of cards as if it were a "vice," like alcohol and tobacco. Taxing decks of cards, associated with gambling, was once fairly common, but most states have since set up separate control boards to regulate liquor and tobacco, and have let the cards slide.
But in Alabama, you'll still pay a 10 cent sales tax on any pack of cards you purchase. Retailers also have to pay $2 to the state each year for the privilege of selling playing cards.
Virginia levies a 50-cent excise tax on every lamb or sheep sold in the state. Both the Maine and Virginia taxes are examples of checkoff programs that collect taxes from an industry to fund promotional campaigns for the products. National commodity checkoff programs, authorized by the U.S. Department of Agriculture, have brought you campaigns such as "Beef: It's What's for Dinner" and "Got Milk?" But the Virginia program is extremely modest by comparison, having collected only $9,000 in fiscal year 2013. The funds go to the Virginia Sheep Industry Board, which spends them largely on predator control.
In 2013, in part to meet federal pollution-control mandates, Maryland legislators enacted fees on property owners in Baltimore and nine other Maryland counties, aimed at curbing storm water runoff. The fees were meant to fund programs to improve the water quality of the Chesapeake Bay, the largest marine estuary in the U.S. Sounds simple enough, but the way Maryland legislators wrote the law has led to an angry backlash in some corners against this so-called “rain tax.” One way localities calculate the tax is by measuring how much of a landowner’s tract is "impervious" to precipitation seeping into the ground. So the more you've developed it with buildings, driveways, tennis courts and the like, the less it will absorb and the more you pay. That's how the tax is being implemented (through aerial and satellite photos) in Montgomery County, a heavily developed suburb of Washington, and many landowners are up in arms. New Maryland Gov. Larry Hogan, a Republican, campaigned against this tax in his winning 2014 campaign and has introduced legislation to repeal it, though it’s not clear that will fly with Democratic state legislators. Money still needs to be raised to satisfy the federal pollution mandates, but the methods may change.
Kansas is among a bevy of jurisdictions that allows sale of lower-alcohol beer (the term of art is “cereal malt beverage”) in convenience and grocery stores. But Kansas also taxes “3.2” beer differently -- and there lies the rub. At a liquor store, all products, including, say, a conventional six-pack of Budweiser (with 5 percent alcohol by volume), are taxed at a special rate of 8 percent. At the convenience store down the street, however, ordinary sales tax is levied on the lower-alcohol, cereal malt beverage bottle of Bud. That often ends up being more than the 8 percent alcohol tax. In Pomona, Kansas, for example, the effective rate on the weaker beer would be 9.7 percent. Go figure.
When it comes to taxation, the rule is generally the stronger the booze, the higher the tax (that's why Kansas's beer tax scheme is an anomaly). California follows that curve, but at 100 proof, you better be ready to pay through the nose. Distilled spirits are taxed at $3.30 a gallon if below 100 proof, or 50 percent alcohol. Go over that, like with Bacardi 151, and the tax doubles to $6.60. Maryland also notes the 100 proof point, but it only adds 1.5 cents per proof, per gallon to the relatively modest liquor tax of $1.50 per gallon, taking the Bacardi 151 to $2.27 per gallon.
Entertainment venues pay a business tax to Nevada ranging from 5 percent to 10 percent on admissions fees (and food, drink and merchandise sales) whenever there’s live entertainment going on. There are exemptions, however, including this one, for businesses that provide "instrumental or vocal music, which may or may not be supplemented with commentary by the musicians, in a restaurant, lounge or similar area if such music does not routinely rise to the volume that interferes with casual conversation and if such music would not generally cause patrons to watch as well as listen." So your piano player can play “Feelings” softly and even crack a few jokes, tax-free, for your business. Just make sure they're not funny enough to attract attention.
Want to own a plush or fuel-thirsty ride? That’ll cost you extra in New Jersey. Cars that cost $45,000 or more or have a combined EPA fuel-mileage average of 19 or below pay an additional 0.4 percent on top of New Jersey’s 7 percent sales tax.
In New Mexico, making it to 100 years has a payoff beyond the chance that Willard Scott will wish you a happy birthday: You don’t have to pay state income tax anymore. If you’ve been physically present in the state for at least six months and a resident of the state on the last day of the year, and you’re not someone’s dependent, you’re eligible. You’ll still need to file, and there are some complications if you’re married and your spouse doesn’t qualify.
As more personal information continues to be stored online, the risk of identity theft also increases. The Bureau of Justice reports that millions U.S. residents experience identity theft each year. If someone uses your personal data pretending to be you, it's a serious crime. With quick, decisive action, you can help discover the fraud, stop further damage and reclaim your identity. Here are six steps to get you on your way.
When someone in your family dies owning property, the federal government imposes an estate tax on the value of all that property. The law that governs estates is constantly changing and so the law may be an inconsistent from one year to the next. However, the good news is that the estate tax doesn't usually affect many American taxpayers who aren't in the top 2 percent of the nation's wealthiest people.
Taxpayers who upgrade their homes to improve energy efficiency or make use of renewable energy may be eligible for tax credits to offset some of the costs. As of the 2017 tax year, the federal government offers two such credits: the Residential Energy Efficiency Property Credit and the Nonbusiness Energy Property Credit. The credits are good through 2017, except for the solar credits which are good through 2019 and then are reduced each year through the end of 2021. Claim the credits by filing Form 5695 with your tax return.