Accepting Extensions: A Stress-Free Small Business Tax Guide

Every year, as an outsourced accounting firm with a small business tax team, we witness the stress cycles of tax season. As the tax filing deadline draws near, the questions start to come in. We usually include two main questions at the beginning of these emails: can you file my personal and corporate taxes, and won't an extension be detrimental? Usually, we respond with "yes" and "no." This is the reason:

Getting a tax extension can be a useful alternative, particularly for people who need more time to collect the required paperwork or handle complicated financial circumstances.

This post will explain why you shouldn't be afraid of a tax extension and how it can help you file your taxes more accurately and methodically, both this year and in the future. Pro Tip: Check out our Tax Guide to learn how to position yourself for a more proactive tax approach.

Defining Extension

With a tax extension, people or companies can ask for more time to file their personal and company income tax returns after the initial tax filing deadline. This extension gives taxpayers additional time to collect all the paperwork, deal with intricate financial circumstances, and make sure their tax returns are completed completely and accurately.

Crucial Reasons That Why Extensions Are Filed

For a number of reasons, including conditions that prevent them from acquiring the specified facts or completing their returns through the due date, groups can also ask for extensions while filing their taxes. Below is a list of regular conditions:

Unfinished Documents:

A business may require additional time to ensure accuracy if it is unable to accumulate all of the financial data and papers by the tax cut-off date.

Complicated Deals:

Companies engaged in complex transactions may need more time to accurately account for those sports and confirm their tax results.

Changes in CPAs or Accounting Staff:

Tax training processes may not be on time due to changes in outside accounting companies or turnover in crucial monetary positions.

Awaiting Third-Party Information:

Businesses sometimes must hold off on filing their taxes till they get essential information from contractors, traders, or partners.

Recent Amendments to the Law:

Businesses may also require more time to recognize the ramifications and ensure complete compliance if tax rules change near the filing date.

Emergencies or Natural Disasters:

Unexpected events like pandemics, herbal catastrophes, or other crises can cause operational disruptions and postpone tax instruction.

Planning for Strategic Finances:

Companies may also practice extensions to maximize credits or deductions or make other strategic selections primarily based on their tax situations.

Legal problems or audits:

Businesses may want to settle ongoing audits or unresolved prison-demanding situations before reporting their taxes, which could motivate delays.

International or Multi-State Operations:

Businesses that operate in several states or countries must follow complex tax legal guidelines, which might take more time to complete effectively.

Aspects of Cash Flow:

A commercial enterprise can also request an extension while putting in the required finances if filing taxes with the aid of the closing date would have a damaging effect on its cash glide.

Extensions can give companies the extra time they need to make sure their tax returns are accurate and comprehensive, preventing mistakes and possible fines.

Important tax pro disclaimer: A tax extension does not extend the deadline for paying any taxes due; rather, it gives additional time for filing federal and state forms. For this reason, knowing your tax liability in advance is vital.

When consulting with a tax or accounting expert, it's important to heed their initial recommendation to request an extension. They will have adequate time to examine your unique tax status and figure out how to optimize results for your company.

Let's examine why the tax extension can be beneficial now that you have a better knowledge of it.

Tax Extension Does Not Increase Audit Risk

In every email, Google Meet, and phone conversation we have with prospective tax clients, we will begin by answering the most pressing question we have: does this imply that I will be more likely to be audited?

Simply put, the answer is no. When you file for an extension, your chances of being audited are statistically lower. Coincidentally, there are a number of reasons why you shouldn't be afraid of an extension. Accuracy is on your side in addition to time. The extra time you've given yourself to do it correctly will probably make the auditing process less unpleasant if you're one of the unfortunate ones who must go through it. When it comes to audits and their results, having all of your federal income tax (and other) information accurately submitted makes a big difference.

It Lowers the Probability of Errors

We understand. You are probably occupied with a million tasks at once if you are a small business owner. When you were a lone proprietor, doing the majority of the filing yourself might have been rather simple. Rushing through the tax filing process is a worse idea now than it was before, especially if you are growing and/or have more complicated matters to deal with.

It won't be enough to just enter deductions until your tax software displays a more appealing "taxes owed" figure. It may result in mistakes and oversights that cost you money or cause you to miss out on chances.

Give yourself and your tax preparation team enough time to carefully go over your financial data. Accept the extension. Knowing that you are reducing errors and guaranteeing a more precise return can ease your mind.

It Assists People With Complicated Business Situations

Accountably serves a diverse range of business owners. Many of them are individuals who are members of partnerships or have complex financial portfolios. These situations may make it difficult for them to quickly compile all the information they need on tax forms for their return. The extension gives us greater freedom to handle any challenges with ease. As a result, your tax return will appropriately reflect your financial status and will be far better the next year.

It Gives You More Time to Speak With Your Tax Expert Team

Not to brag or anything, but you may greatly improve the quality of your tax return by working with a professional tax team like Accountfully. You can enjoy discussions and team updates without worrying about an impending deadline when you have a tax extension. This makes it possible to have more thorough conversations and plan strategically to improve your financial situation. Who knows, maybe we'll notice something that we can use to plan for next year and start your company on a new path to improved tax results.

It Lowers Anxiety and Stress

If there's ever a way to ease some of your business tax-related stress, Accountfully is a fantastic place to start. However, we don't promise to be the solution. A tax extension might help small business owners who are stressed about meeting deadlines because taxes can be complicated and time-consuming. A more zen-like approach is encouraged by the extra time, giving your team a better grasp of every aspect of your financial condition. One of the best ways to guarantee more peace and less stress is to give yourself a longer time frame to file.

Conclusion:

Think about using a tax extension this year to adopt a more accurate and laid-back tax filing strategy. It should be viewed as a helpful resource rather than a warning sign of an audit. More precise and comprehensive tax returns can result from using the opportunity to extend the tax filing date.

Small business owners can use this option to get competent assistance less late, handle complicated financial problems, and eventually face tax season with clarity and confidence. This proactive approach has the extra benefit of putting your company on a fresh and favorable course for upcoming tax years.