The deadline to file your 2007 tax return is now less than 36 hours away. Will you make it in time?
Millions of Americans won't.
The Internal Revenue Service expects that 10.3 million people will request extensions on their returns — that's up 300,000 from last year.
Everyone is eligible for an extension, which allows taxpayers six more months — until Oct. 15 — to file returns. Requesting an extension won't make it any more likely that you'll be audited later on.
"I think some people feel that if they file an extension, it's going to be a red flag or something," said Tom Ochsenschlager, the vice president of taxation for the American Institute of Certified Public Accountants. "It's not."
The bad news? Like tax returns, extension requests are also due April 15, and filing one doesn't mean you get more time to pay your taxes. It just means you get more time to finish your paperwork.
Taxpayers filing requests -- be it for complex financial reasons or just plain laziness -- must still estimate roughly how much they owe the IRS (if anything) and send a check for that amount by April 15. If your estimate is too low, you risk facing stiff fees and penalties.
"You have to come pretty doggone close to what you're going to have to pay," Ochsenschlager said.
"The problem is if you haven't done any work at your return at all, in order to avoid penalties you have to be kind of conservative and overpay what you think you're going to owe," he said.
Ochsenschlager said that last-minute extension-seekers could use their 2006 returns to help them figure out what they owe this year. But if you had a major life change in 2007 — perhaps you bought or sold a home or got a new job with a new salary — that must be taken into account in your 2007 estimate.
David McPherson, the founder of Four Ponds Financial Planning in Falmouth, Mass., and an ABC News columnist, said the major reason to file your taxes on time and avoid a filing extension this year is the government's new rebate plan.
"To receive a rebate, you must file a 2007 tax return. If you file for an extension, you will still be eligible for a rebate payment. But that payment will not arrive until after you have filed your actual return," McPherson wrote in an e-mail to ABC.
The rebate plan, which is intended to help stimulate the slumping U.S. economy, will provide about $600 for eligible individuals and $1,200 for couples. The IRS is distributing the stimulus plan rebates according to a schedule that stretches from next month to July.
Ochsenschlager said that any traditional tax refund you are owed — a result of paying too much in taxes during the year — will also take longer to be paid if you file for an extension.
"You're giving the government an interest-free loan all the time that you're waiting, so you should file as quickly as possible," he said.
Ochsenschlager said there are two types of people who apply for extensions: Those who simply procrastinate and those with complicated financial transactions.
The latter include investors in hedge funds and real estate investment trusts, Ochsenschlager said.
Hedge funds, in particular, he said, are notorious for waiting until after April 15 to provide investors with the information necessary to file their returns.
"It takes a long time to do a hedge fund return because of all the derivatives and all the crazy investments they've got," he said.