Tax Return Extension
Many taxpayers may think that filing an IRS Income Tax Return Extension is bad. While your individual tax returns are due April 15 each year, you can file an automatic 6-month extension so that the return is not due until October 15. A rumor is that you have a better chance of getting audited if you file an extension. However, that is simply not true. In fact, there are several benefits to filing for a tax extension. CPA Tampa in Largo, FL takes a look at these benefits.
1. More CPA Choices
If you try to find a CPA on April 1st, you may have a hard time finding a good one. Most good CPA’s are swamped from February through April each year. Then again from September through October. About 30% of tax pros did not take on new clients this year for various reasons. Many CPA’s stop taking new clients during their busiest times of year.
So, hire your CPA as soon as possible. Hiring a tax pro off season gives you a better choice of the top CPA’s who were otherwise too busy. You’ll likely get an appointment sooner, and the CPA will be less stressed.
2. More Time
While you still need to make your tax payments by April 15, you will have more time to get your documentation together for the tax pro. Especially if your accounting records are not up-to-date, this gives you more time to find an accountant (or let us do it), so that they can help you get caught up with your books. When documentation is more complete and less rushed, and your books are accurate and current, both you and your tax pro will have a better outcome.
3. SEP-IRA Contributions
If you are a qualified business owner, you can contribute to your SEP or Simplified Employee Pension after April 15th and have it count toward last year’s taxes. But only if you file an extension. This gives you more time to max it out if cash flow didn’t allow you to do it earlier.
4. Fewer Errors
Let’s face it: accountants are only human. From February to April, some accountants put in 80 or more hours per week for several weeks in a row. They are trying to get both business and individual returns filed, along with managing their business, dealing with a disorganized and underfunded IRS, handling staffing shortages, and making time for personal lives. Mistakes will be made when staff is “overtaxed.” You are more likely to get a cleaner, comprehensive return completed when the accountant is not working such long hours.
5. Final Forms
There are a few forms, including Schedules K-2 and K-3, that were published late by the IRS. There is a trickle-down effect when the IRS decides to publish late guidance and final forms. The tax software companies, like QuickBooks need time to update their systems, and accountants need time to educate themselves on the tax law changes. As of recently, the IRS still couldn’t receive these forms via a normal electronic filing. They needed to be attached as a PDF or filed on paper.
The last thing you want to do is file anything on paper if you don’t have to, as the IRS is still years behind on processing paper returns due to the pandemic closures in 2020, old systems, budget tightening and staffing shortages.
6. IRS Guidance
The IRS produces guidance during each tax year. Sometimes it benefits the , and sometimes it doesn’t. In any case, it tends to clear up issues and ambiguities for filing taxes. Waiting to file your taxes can help to avoid having to file amended returns, which can be a costly.
7. Filing an Extension
Contrary to conventional rumors, filing an extension can be a good thing. Feel free to reach out to CPA Tampa if you’d like to discuss extending your return. All consultations are free.
CPA Tampa is an CPA firm located at 801 West Bay Drive, Suite 435, Largo, Florida 33770. We cover accounting, business and personal taxes, bookkeeping, payroll, IRS audits and more.