Tax season is right around the corner, and if you have not already gotten your paperwork organized, it might be worth considering filing for an extension. This is especially true if you own a small business that has been recovering from Covid, or if you are in need of a few extra weeks to gather your necessary documentation. In this article, we will explore the signs to look for that may indicate if you need a tax extension.
If you are missing any necessary documentation, this might be a sign that you should file for a tax extension with the IRS. It is important to have all of your documentation together so that you can avoid fees that add to the lump sum you already owe. Any receipts, deductions, W-2s, or 1099-K forms that are missing from your files must be collected before appropriately filing your taxes.
Strapped on Time to Complete Paperwork
It’s no secret that businesses have been set back as a result of COVID. Especially for small businesses, getting back on your feet can seem easier said than done. If you are strapped for time and know that you will miss the IRS tax deadline, it is important to file for an extension before it is too late.
Ensure You Are Getting All Benefits and Tax Breaks
When doing your taxes, it is important to make sure that you have taken advantage of all benefits and tax breaks that apply to you. This can help offset the cost of the late filing fee.
Avoid Failure-To-File Penalties (Which Can Add Up to 25%!)
If you know that you will not be able to file your taxes by the IRS deadline, for whatever reason, you should file for an extension. If you avoid filing and do not notify the IRS of your need for an extension, you may be penalized with a failure to file fee. While paying a fee might not seem like a big deal at the time, these penalties can add up to 25% of the total amount of taxes you owe.
When to Avoid an Extension
Remember, you should try to avoid filing late if at all possible. Keeping organized throughout the year and working alongside a professional can help. You make sure that you are ready to take on taxes weeks in advance. You should avoid filing for an extension if you have the inability to pay your taxes, or if you are trying to avoid an audit. The IRS will not be forgiving if you are not able to pay taxes owed throughout the year, and filing late does not exclude you from randomized audits, conducted by the IRS.
We hope this article helps you better understand whether or not you need a tax extension this year. Remember, if you are on the fence about not being able to file in time, it is best to err on the side of caution and file for an extension just to be sure. Failure to file can cost you a significant amount in fees.
Contact Bottom Line Consulting today to get in touch with one of our professionals who can help you file on time and correctly!