Let’s take a quick break from tax reform and talk about the upcoming tax filing deadline. We are all blessed with two extra days of tax season this year (sarcasm intended) and have until midnight on April 17 to get returns filed or extensions prepared. I want to quickly talk through this deadline and make sure everyone has the right information when it comes to filing an extension.
FACT # 1
An extension is an extension of time to file your return only. You still have the requirement to pay the tax that you think you owe.
Many people believe they can just send in an extension and deal with everything in October. That is not the case. You still must make your best effort to determine your tax liability and send in a payment. Underpayments of your tax paid with extension will still be subject to interest, but no penalties will apply if you have paid in at least 90% of your tax liability. In a worst-case scenario, if you miscalculate and under-pay substantially with your extension, you can be subject to both failure-to-file and failure-to-pay penalties.
FACT # 2
Filing an extension does not increase your audit risk.
Many people are fearful of extensions because they are fearful of audits. There are no official statistics kept at the IRS on the number of audits for returns on extension versus returns filed by the original due date. The IRS only releases official audit statistics on income levels and types of returns. The conservative answer is that filing an extension does not increase or decrease your risk of audit. Don’t let the fear of audit influence your decision or attitude about extensions.
FACT # 3
There is a compressed time to complete returns.
Let’s face facts here. The later you are in supplying complete information to your CPA, the better the chances that your return will have to be extended. This is why we published a date on our organizer and sent out a reminder of our date to receive your information. We prepare returns in the order they were received. So, if you sent your information in after the March 27 deadline, we may need to file an extension. This is simply an hours-in-the-day situation.
We Want to Provide Peace of Mind
At WSW, our goal is to be your advisor and help you build wealth, not just be your tax preparer. Part of what we do is prepare and file tax returns to help keep you in compliance. Our core purpose is to “Provide Peace of Mind.” If visiting us once a year so we can prepare and file your tax return accomplishes that for you, we are happy to remain in that role.
Our greater desire would be to work with you and your other advisors during the year to help you accomplish your goals, grow your business and build your personal wealth.
That also includes keeping you aware of your tax obligations so there are no last-minute surprises in April. It also puts you in a great position to no longer fear an extension because you have planned and know the amount of money you may owe. This makes filing an extension only a time-to-file decision, not a time-to-pay emergency.
If you have any questions, please feel free to ask any of the tax professionals at WSW.
THANK YOU, AS ALWAYS, FOR YOUR TRUST IN WSW CPAs.