How getting an extension could reduce the chances of an audit

This article looks at why applying for a filing extension with the IRS could reduce the risk of an audit.

There are many myths swirling around about what does and doesn't trigger an audit by the IRS. One of those myths is that applying for an extension for filing one's taxes is more likely to attract the scrutiny of tax auditors. However, as Forbes points out, there is no data to suggest that getting an extension will increase one's chances of being audited and, in fact, an extension could help individuals file a return that is less likely to result in an audit. Below is a look at how to apply for an extension for the filing deadline and how such an extension may help reduce the chances of a tax audit by the IRS.

Applying for an extension

Applying for an extension to the filing deadline is remarkably easy. Tax filers need only submit Form 4868 directly to the IRS, asking a tax preparer to do it for them, or apply for the extension electronically using commercial software. There is no need to provide a signature or a reason for the extension. Instead, anybody who applies for the extension, which grants an extra six months, is given it. According to the New York Times, 13 million people requested such an extension last year.

It is extremely important to realize, however, that an extension of the filing deadline is not the same as an extension of the payment deadline. That remains April 18 this year, meaning that anybody who thinks they owe money to the IRS should approximate how much they owe and pay it as soon as possible. It is better to overpay and get a refund later than to underpay and be hit with a penalty for not paying enough.

How an extension reduces audit risk

Filing for an extension deadline alone won't reduce the risk of an audit, but it can give taxpayers extra time to make sure they get their return right, which can reduce the risk of an audit. Rushing one's tax return is more likely to lead to errors, which will require amendments to be made. The more amendments on a return, the more likely the IRS is going to look at it closer for other errors or irregularities. Filing for an extension also gives taxpayers an opportunity to make sure they have all their forms in order, especially missing K-1 and W-2 forms.

Legal help with tax problems

Of course, no amount of preparation can fully protect against a tax audit. For those who have been unlucky enough to be on the receiving end of an IRS audit it is a good idea to contact a tax attorney as soon as possible. Tax law is incredibly complex and people who are being audited often don't know what their rights or obligations are when dealing with the IRS. A tax attorney can help those who are being audited make sure their rights are being respected and that any dispute with the IRS is resolved quickly and satisfactorily.