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Taxes 2022: When to file for an extension

AICPA Lead Manager on Tax Practice & Ethics April Walker joins Yahoo Finance Live to talk about the circumstances of filing for a tax extension, important dates for taxes, the IRS backlog, and the importance of staying organized.

Video Transcript

- My guest says it's still not too late to get ready in time or file an extension. As part of our Taxes Made Simple series presented by Tax Act, I'm joined by April Walker AICPA lead manager in tax practice and ethics. Thank you for joining me today.

So first of all, how do you know if you need to file an extension? Who is this best suited for?

APRIL WALKER: Right. So the good thing about an extension is that it is automatic. So you don't have to qualify to file an extension. So it could be anyone who is having trouble gathering their data, or maybe they have a business return, and they're waiting on their CPA to prepare their business return.

And it's coming up on April. It's April the 18th this year. So that's one thing I would like to bring to everybody's attention. It's Monday, April the 18th is tax day this year. So anyone that's just--


- You're saying that, for that deadline coming up April 18, any other deadlines people should be aware of between perhaps filing for an extension and then how they follow up afterwards?

APRIL WALKER: Sure. So how you file an extension is pretty simple. If you're working with the CPA, you should just let them know, and they can handle it for you. One thing that's really important about an extension that I didn't talk about is that it extends the time to file, but it does not extend the time to pay.

So if you are going to owe money, if you historically have owed money or if you have had an event, a stock sale or something like that, that you know that you're going to owe tax, that tax is still due on April the 18th. So even if you're not quite ready to file, you will need to be prepared to make that payment.

So you can do that a couple of different ways. You can make the payment online, on irs.gov. Again, if you're working with your CPA or your accountant, they can help you with setting up the drafting of the account through their software. If you're using your own software, like you mentioned Tax Act-- Tax Act, if you're filing your own, it will walk you through the process of filing that extension.

One other thing I'd like to make sure everybody knows is the federal-- so the federal return is due April 18. Normally, a state return is also due that same time. And normally, the federal return extends the state. But there are a couple of states that that's not the case. New York is one, for example.

So you just need to make sure that you are taking care of your state return if you decide that filing an extension is right for you, to take care of both federal and state.

- But in terms of changes, I mean, there were several things at play last year. You had COVID stimulus checks, this ongoing IRS backlog, reconciling child tax credits. What's the best way to really make sense of it and organize it, and especially if you don't have your previous returns back in yet?

APRIL WALKER: Right, yeah, definitely, you hear so much about the IRS backlog. And if you filed a return on paper, you might not have been processed yet. So that might be another reason, another really good reason to extend if your 2020 return hasn't been processed yet.

Just organizing is just a matter of, like you mentioned, the advanced child tax credits, those and then the third economic impact payment, the stimulus payment, so another good reason to file an extension is if you're not sure about those payments for whatever reason. You need to make sure that those payments that you're putting in the return are exactly correct because if you put in the right amount and you submit your return and the number is wrong, the IRS is going to immediately flag that return.

And even if you were expecting a refund, it's going to flag it, and it's going to be delayed. So just, everybody has their own system for organizing their tax data, whether it's folders or electronic organization. So I don't like to tell people what to do on how to organize. But the important part is to organize it and make sure you get it right, especially this year, because you certainly don't want to cause another delay of your return being processed.

- There you go. At least people have more than a month's heads-up. We do appreciate you coming on. April Walker there, AICPA lead manager in tax practice and ethics. Thank you for your time today.