Filing an extension should decrease your chance of audit. The reason is that IRS auditors have quotas they need to meet, and extended returns are typically and the end of the auditor's stack... or their quotas are met before they get to the extended returns. Use a site like FileLater ( http://filelater.com) to file your income tax extension. They'll guarantee your extension is filed correctly so the IRS doesn't have a reason to audit.

You can file by the April 15th deadline and ask for an installment plan or file an extension. Filing late does not always mean that you'll be audited but you will be charged a late filing penalty. I found the following info on the IRS website (www.irs.gov): If you cannot pay the full amount due as shown on your return, you can ask to make monthly installment payments. However, you will be charged a one time user fee of $105.00, as well as interest on any tax not paid by its due date, and you can be charged a late payment penalty unless you can show reasonable cause for not paying the tax by the due date (April 15, 2008 for individual income tax returns) even if your request to pay in installments is granted. Penalty will be charged until it reaches 25% of the original balance due and interest will be charged until the account is fully paid. Before requesting an installment agreement, you should consider less costly alternatives such as a bank loan. To request an installment agreement send Form 9465 (PDF), Installment Agreement Request, with your return or call (800) 829-1040. If you call you can also request a direct debit agreement or a payroll deduction agreement. You should receive a response within 30 days if you submit the form with your return. For more details on installment payments, refer to Tax Topic 202, What to do if You Can't Pay Your Tax, or Publication 594 (PDF), Understanding the Collection Process.