Tax File Extensions On The Increase Says Report

by Leroy Baker, Tax-News.com, New York

14 August 2003

A report by the Treasury Department's inspector general has found an increasing propensity amongst certain high income taxpayers to consistently apply for a four month extension to file their tax returns.

The study has found that in general, increasing numbers of taxpayers are asking for an automatic extension beyond April 15. This has led the Treasury to warn that the sanctity of the deadline is losing credibility amongst a large swathe of taxpayers.

The inspector general identified around 1 million individuals with an average income of $104,000- more than twice that of the average taxpayer- who consistently ask for an automatic extension. Investigators also found that many of these individuals had self-employment income, and used professionals to prepare their taxes.

"The cumulative effect of these problems could erode public confidence in the fairness of the tax system," the department observed.

To apply for a four month extension beyond April 15 is a very simple process, and all the taxpayer needs to do is complete a short form. However, this is proving to be very costly in administrative terms, as more and more people apply, and sets the IRS back around $8.4 million per year, according to the report.

This year the IRS reported that 8.5 million applied for a four month extension, and revealed that the Revenue is anticipating 3.5 million of these will apply for a further two months.

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