Will I Get Audited if I File a Tax Extension? |
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Like a lot of taxpayers, you might think that filing a tax extension means your return gets put in the "audit" stack. Anything that makes you stand out will make your return look suspicious, right? Not so fast. No one (except the IRS) knows exactly how the audit process really works (eeny meeny miney mo?), but many tax experts believe that filing an extension actually reduces your chances of being audited. Why? Because every IRS agent has a quota to fill--but they start filling it up in mid-April or even earlier. Many CPAs believe that IRS quotas get filled well before the tax extension deadline of September/October 15 (for business & personal income taxes, respectively). When it's quota-filling time, any excuse to audit you will do--but if the quotas have been filled, there's no reason to audit anyone unless your return is really egregious. (In fact, there may even be incentive not to audit at that point, since it simply creates more work for the officers.) There is some debate over the veracity of this theory, but one thing is sure: filing a tax extension will not single you out for unfavorable treatment. More than 10 million taxpayers (out of 140 million total) filed tax extensions last year. Nearly 50% of US corporations did, too. How Does the IRS Feel About My Tax Extension? Many taxpayers believe that the IRS frowns on tax extensions, and that even filing one is a black mark on your record. However, the IRS automatically grants a six-month extension to anyone who fills out the correct paperwork--and they don't ask for a reason. And by filing your extension, you're actually playing by IRS rules (which we all know they prefer!). Plenty of people and businesses just file late, period, without getting an extension--and they have to pay late fees. Besides, it's not just you and your accountant who needs a bit of a break in mid-April. IRS agents are under huge time pressure to process tax returns and issue refunds quickly, while watching out for suspicious documents. The lower their load, the happier everyone is. So file a tax extension online this year! Your accountant and your IRS agent will thank you. |