So you've probably heard about extensions...not the ones that make your hair look cool and luxurious, but the ones that give you extra time to file your tax return(s)! You probably have a few questions, if not more, and we've got you covered.
Q: What does filing an extension do?
A: An extension is a formal request to the IRS for additional time to file your federal tax return. You're still required to pay any taxes you owe by the original due date, so we'll help to calculate an estimate of what you'll likely owe with your final tax return so that you can pay this in April.
Q: What are the differences between filing an extension for my S Corp and for my personal tax return?
A: An S Corp doesn't pay tax to the IRS or to most states from the business itself, unless you Californians out there elect the new AB150. Instead that income passes onto you as an awesome solo owner, and you pay tax on it as an individual. Because of that, the S Corp doesn't have any payment due to file an extension, so we automatically extend all S Corp returns proactively. We'll need more information in order to prepare an extension for your individual tax return, and there's a payment due with individual tax extensions.
Q: If I file an extension, what is the new due date for my tax return?
A: This extension is for 6 months, so you'll have until September to file an S Corp return and until October to file your personal tax return.
Q: Why should I extend my tax return(s)?
A: There are a few reasons you might want to extend your tax return(s). Here are a few reasons you might want to extend.
If you haven't been able to provide all of your tax information to us by the submission deadline, we'll recommend that you extend to give our team ample time to file a complete and accurate tax return for you.
If you're waiting on additional information from financial institutions or companies you invest in, you'll want to extend your tax return(s) so that you can file a return with accurate information.
If there's pending legislation that may affect your tax liability, that's another great reason to extend.
If you want or need additional time to contribute to a retirement account like a SEP IRA or employer portion of Solo 401k, you can get extra time to do so by extending your tax return due date.
Q: Am I more likely to be audited if I extend my tax return?
A: Nope! Extending your tax return isn't something the IRS cares much about at all. What they DO care about is receiving accurate and correct tax returns, and if that means extending a tax return, they're cool with that. It's always better to file an extension than to file a return that isn't complete or that you haven't had a chance to review before signing!
Q: What should I expect when I need to file an extension?
A: You should expect to pay any anticipated taxes owed by the original due date of your individual tax return in April. That means you should provide as much tax information as you can as soon as you can, so that we can calculate the approximate amount of tax you'll owe.
Q: If I file an extension, does that mean nobody will look at my tax information until the fall?
A: We're here to help you throughout the year, and we want to get your tax returns filed as badly as you do! Once we have completed information, we'll work on getting your tax return finalized and sent to you for review and signing. As long as you don't wait until the fall to send over information, we won't wait to prepare your return(s)!
Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining accounting or other financial advice from an appropriate financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.