An estimated 19 million Americans filed for an extension on their 2021 income tax returns.
Deadline changes, new Covid-related legislation, and the usual tax code complexity have all made filing an extension a necessity for countless taxpayers.
In particular, financial initiatives, like the Paycheck Protection Program (PPP) and employee retention credit, enacted during the pandemic, have added a great deal of difficulty and uncertainty to the tax filing process.
Nevertheless, the October 19 extension filing date is quickly approaching. And if you haven’t already, you should be preparing to file your taxes.
Not sure where to start? Here’s a basic overview that will point you in the right direction!
Get Organized
With less than four weeks left until the deadline, getting organized is a critical first step. And the process begins by communicating with your tax preparer and providing them with all info ASAP.
Pull together all the relevant documents you have on hand. Then contact your preparer to review and see what, if any, documents you still need to gather.
And finally, schedule your filing preparation appointment.
Don’t Wait On Pending Documentation
It can be tempting to hold off on filing if you’re still waiting on pending documentation, especially if this prompted you to file an extension in the first place.
For example, K-2 and K-3 forms, which address international taxes (these items accompany Schedule K-1 forms for partnerships and S-Corps, and trusts + estates), may not arrive until September 30 at the latest.
But rather than waiting on these forms, prepare a draft return and then update accordingly when the documentation arrives before submitting your completed filing.
With this approach, you’ll avoid scrambling to obtain other documentation you may be missing but inadvertently overlooked.
eFiling Is The Most Reliable + Efficient Method
Most CPAs and tax prepares favor eFiling because it eliminates any reliance on the US Mail, which has been increasing dodgy in recent years.
With eFiling, on the other hand, the receipt is confirmed on the spot. Doing away with any: “well, I dropped it in the mail over a week ago” sort of worries.
Also, if you’re expecting a refund, you’ll likely get it faster if you eFile your tax return. The IRS reports that “error-free returns” are usually processed in about three weeks.
If You Haven’t Paid Yet, You Could Be Facing a Penalty
Filing an extension on your tax return does not exempt you from paying taxes due upon the initial filing deadline. You should estimate what you own and pay by the original deadline.
Failing to do so may subject you to a late fee, which is 0.5% of your unpaid balance and accrues monthly (capped at 25%). Plus, the penalty rate increases on October 1.
And though most CPAs and tax preparers typically communicate this fact, it seems to breeze over many people’s heads.
Need Help Filing Your Tax Return?
If you filed an extension but have yet to get started on filing your actual return, I strongly encourage you to get in touch for a FREE consultation!
