Extensions Explained: Why More Time Means Better Results

It's January, and the advertisements for tax software and services are in full swing. While the deadlines to receive the most common documents are earlier in the year (January 31st for W-2s and 1099s, and February 15th for brokerage 1099-Bs), there are still compelling reasons to consider filing an extension for your individual tax return.

What is an extension?

An extension gives you extra time to file, not to pay. You still need to estimate and pay your tax liability by April 15th. If you underpay, you'll owe interest and penalties on the shortfall. To qualify for a valid extension, you must pay a minimum of 90% of your tax liability.

Reason #1: Business Owners

If you own a business or have an interest in one, taking extra time can help ensure accuracy. An extension allows you time to clean up your bookkeeping and include all expenses correctly. Plus, if you receive a Schedule K-1 from a partnership or S-Corp, those often aren't available until March 15—or even September 15 if the business itself files an extension.

Reason #2: Investors

If you invest in stocks, the 1099-B from your brokerage company is due February 15th. That being said, it is not uncommon for the broker to send an amended 1099-B several weeks later. Additionally, if you sold any virtual currency (e.g. Bitcoin), there is a brand new filing requirement starting in 2025 for those with sales over $600 during the year. These new 1099-DAs are not required to be issued until March 16, 2026, so accurate reporting may require extra time.

Reason #3: Your Accountant

Tax season is a bottleneck for accountants, with only 60-75 days to file complete returns for an entire portfolio of clients. Agreeing to extend can reduce stress and allow your accountant more time for strategic planning—potentially uncovering deductions or tax-saving opportunities that rushed filings might miss.

Filing an extension isn't about procrastination—it's about precision. Whether you're a business owner, an investor, or simply want your accountant to have the time to optimize your return, an extension can be a smart move. Just remember: you still need to pay your estimated taxes by April 15 to avoid penalties. Taking the extra time now can lead to fewer mistakes, better planning, and peace of mind.