You've been trying hard to get your tax act together, but it looks as if you won't make it by April 17. We look at your options.
If you owe tax, you must make a payment on time; but you can get an automatic six-month filing extension until Oct. 16 by filing Form 4868 by April 17 (you get two extra days this year, since April 15 falls on a Saturday). But should you?
To begin with, don't let an obsession about due dates be a factor. "Some doctors are determined to 'get it in on time,' like a high school book report," says Douglas Gaston, a CPA in Kansas City, MO. "But it's generally better to wait and have everything complete-like limited partnership K-1 forms, which often arrive late-than to be on schedule and risk an audit because your return raises questions."
Yet doesn't filing late, by itself, increase the chance of being audited? Accountants agree that it doesn't. "The truth is that few taxpayers actually get audited these days, whether they file on time or not," says CPA Sherman Doll, of Walnut Creek, CA.
Be aware, though, that not all advisers share that attitude. Doll says he likes to get returns finished on time to allow him to concentrate on other matters later. "Besides, extensions mean extra work, since you have to do enough to estimate a payment by April 17. It's like preparing a return one and a half times." Doll, in fact, says he charges more for clients who request a later filing. So you'd be wise to learn your own adviser's attitude.
But don't become enamored with unnecessary procrastination. "I can accurately predict the prior summer which doctors will call me on April 14, 2006, looking for an extension," says CPA Baldassari. "That means more time spent, which could result in extra fees." Besides which, you'll owe the IRS interest on any tax not paid by April 17, even with filing extensions. If the tax you paid along with your filing extension, plus withholdings and any estimated tax payments, ends up being less than 90 percent of the total tax shown on the return, you could also be on the hook for a late-payment penalty.