Date: September 23, 2022
The Tax Extension Deadline is Approaching Fast – Are You Prepared?
Approximately 19 million Americans filed an extension for the 2021 tax year, setting a new record! With the added complications of COVID and understaffing of many businesses (including accounting firms and tax preparation firms), many taxpayers filed an extension out of necessity. With October 17th less than a month away, here are some things you can do to make sure you meet the deadline and avoid unnecessary penalties and interest.
- The backlog from the IRS is still a big concern. Picture 18 wheelers full of unopened mail! If you are expecting a refund, file electronically and select direct deposit to expedite the process as much as possible. Be sure to communicate with you tax preparer and to get them any requested documents as soon as possible. Waiting until the last moment will likely put your return preparation at the end of the line and cause a headache you don’t need. If you do have to file on paper, keep in mind that it’s taking 16-18 months on average to process the returns.
- Have a professional on your side. Many business owners took advantage of the SBA’s Paycheck Protection Program (PPP) to help mitigate the financial stresses of COVID. Coupled with the Employee Retention Credit (ERC), these programs added an extra layer of complexity to filing your taxes. Having a Tax Professional review and file your taxes for you will help ensure there are no mistakes on your tax returns.
- Did you make your payment by the April 18th deadline? If you didn’t, you will owe a failure to pay penalty with interest. The interest rates for underpayments jump from 5% to 6% on October 17th, and they compound daily! It’s important to make your payments on or before the Filing Deadline to avoid the failure to file and failure to pay penalties/interest. If you are confused by how much you should pay, you are not alone. The Tax code is purposely confusing, and estimated payments are difficult to calculate. This is another reason why having an expert on your side will take the guesswork and stress out of your situation.
You can also take steps to protect yourself from a potential audit by having a professional on your side. We love helping our clients review their tax situation so that they don’t get a surprise bill, all while legally reducing or eliminating their tax obligation! If you would like help navigating the complicated tax code or feel like you are one of the many who end up overpaying in taxes, contact one of our tax strategists here for a complimentary assessment.