Date: October 13, 2022
Have a Tax Extension? Avoid the Increased Interest with These Tips
If you are one of the estimated 1 in 8 taxpayers who filed an extension for the 2021 tax season, did you know that the IRS increased interest rates effective October 1st? The rate increased from 5% to 6% for underpayments and overpayments – you read that right, you also get dinged for making an overpayment! With the tax extension deadline of October 17th fast approaching, here are some tips to ensure your filing goes smoothly.
1. Don’t skip any key forms – Even a small mistake will end up causing a delay, and the IRS is still very back-logged, which means an even longer wait time. If you are rushed and forget any forms, then you’ll get flagged as an incomplete return and end up spending lots of time waiting to get the issue resolved. Nobody wants that mess! Be sure to include any W2s, 1099 NEC (Nonemployee Compensation) for contract work, etc. Not sure if you have every form you need? You can check the IRS site for free by pulling your transcript.
2. E-File and use direct deposit – With the added complexities that COVID brought, such as the child tax credit, and the intricacies of cryptocurrency, you will want to have an expert prepare your returns. This will save you time and help prevent any errors, ensuring accurate filing. E-filing and selecting direct deposit is the fastest route, and it is also what the IRS suggests. Having an expert prepare your taxes is vital to making sure that your return is complete and free of mistakes – which is key to not triggering any IRS alerts (definitely a headache you don’t want).
3. Make sure you are not missing out on tax savings – As you may know, the tax code is purposefully written to be confusing. Take estimated tax payments for example. Many business owners feel like it is pure guess work trying to figure out how much they should pay (understandably so). As mentioned above, you get penalized for underpaying and overpaying! One of the smartest moves you can make financially as a business owner is by having a tax plan. A Tax Strategist will analyze your business needs and implement legal, transparent strategies that will reduce or eliminate your tax bill, so that you can retire sooner with more money!
We love helping our clients legally reduce their tax bill so that they can reinvest in themselves and their businesses. Implementing a tax plan is a smart, proactive, year-round approach. If you think you are one of many business owners that end up overpaying in taxes or feel like a tax plan is something worth exploring, contact one of our tax strategists here for a complimentary assessment.