Yes, it’s nice to have a little bit more time to enjoy life and more time to work with my on-going clients.
And No. Often, we file tax extensions because we do not have the time to prepare financials and therefore the tax returns accurately if data comes from various sources or is not kept up to date on a regular basis (weekly, monthly, etc). So now that the first filing deadlines have been met with an extension, the pressure fades a bit from the taxpayer’s perspective and is easily left until “tomorrow.”
Tomorrow becomes a week, then a month. Summer comes along, vacations are taken.
And now taxes are forgotten.
The next thing you know, we are looking at the extended filing deadlines for that tax year and no forward movement has occurred. Pressure builds. So what should be an enjoyable Fall, becomes more stress filled because of the time deadline and often still dealing with inadequate or disorganized information.
There are alternatives to the delayed craziness.
If the only reason for an extension is due to need for a tax document such as a K-1 from a partnership, and you receive it, then have the return ready with the exception of that information, and once received, the data should be able to be dropped into the tax return software. Review and then file the return.
If the reason for extension is a bit more complicated, such as not having your records in order, I suggest that you take advantage of the time and get yourself into a system that gets you caught up and keeps you up to date.
The easiest way to do this is to use accounting software that is able to link and feed your credit card and bank account transactions directly (i.e. Xero) so that you just have to review and reconcile. Although this is not always uncomplicated to setup (especially if you are a bit afraid of seeing your numbers or don’t understand your finances) it is worth the time and effort.
For some, dealing with their finances is a scary thing and are better off getting help.
This would be a great time to find a bookkeeper who can take your finances and get them in order. There are various services you can ask for, from annual work to get your tax documents and banking in order, to monthly (I recommend this to everyone) bank reconciliations and reports. Or something in between where they set up the system for you, you keep up on the updates and on a periodic basis have check- in to answer questions.
What if you started your return, but realized that you need help, and filed an extension instead? This is the perfect time to find a tax preparer. Most have more time now and often times will have more time to spend with you (and possibly more patience).
Whatever your reason for extending a tax return, it is important to remember that your tax was due by the original filing date (March 15 for corps, April 15 for individuals) and that if you did not pay the full amount due, then you will be subject to penalties and interest on the tax due. So, if you actually have the return done before the extension deadlines, file and pay the return as soon as you can.
The concept to take away and implement – whatever reason you filed an extension for your taxes, don’t wait until the month (or less) before the extension due date. Instead, make everyone’s lives easier by making “tomorrow” today. And if you need help, ask for it.