Only 20 percent of Affluent households report they have ever filed for an extension to submit their taxes, or plan to do so this year.
Affluent investors most cite hard work as the primary factor in their financial success. This involves planning and preparedness, and, in the case of filing their taxes, promptness. A new survey of Affluent households by Spectrem Group’s Millionaire Corner finds that only 20 percent have ever filed a tax return extension or plan to this year.
Not surprisingly, net worth is a factor on who is most likely to file for a tax return extension. Four-in-ten respondents with a net worth of at least $5 million said they have filed an extension or plan to do so this year, compared with 20 percent of those with at least $1 million. Households with a net worth of under $100,000 were the most likely to be paying their taxes by the April 15 deadline (89 percent).
According to the IRS, individuals most likely to apply for an extension to file their taxes have the most complicated financial situation and need more time to assemble their return. A majority of respondents (54 percent) indicated to Millionaire Corner that they had filed for an extension, or planned to do so, because they had not received all of the necessary tax documents, while 17 percent said they are small business owners and account cycling or paperwork is slow. The same percentage confessed they were not organized enough to file on time.
Nearly three-in-ten cited “other reasons” for not filing on time.
Individuals can get an automatic six-month extension to file their taxes by filling out Form 4868. There are other forms for corporations and business partnerships.
Filing for an extension does not mean that you don’t have to pay your taxes by April 15. It only means you have until October 15 to file your returns. Taxpayers need to estimate the tax they owe and pay it. But filing for an extension can help taxpayers avoid a 5 percent per month late filing penalty that the IRS imposes.
Another benefit of filing for an extension is that it can preserve your tax refunds even if you happen to be several years late. There is a three-year statute of limitations for receiving a refund check from the IRS. With an extension, this three-year deadline is also extended by six months.
For those unable to pay the taxes they owe by April 15, the IRS offers payment plan options including installment agreements for those who owe less that $50,000 in income tax, those who owe more than $50,00 (IRS Form 9465), and businesses that owe $25,000 or less in back taxes (IBTF-Express IA).
It costs $120 to set up a standard agreement or payroll deduction agreement, and $52 to set up a Direct Debit agreement. If your income is below a certain level, the fee for setting up an installment agreement is $42. To request this reduced fee, submit Form 13844.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.