Why You Want to Avoid Tax Extensions
Sep 02, 2024As a business owner, filing a tax extension might seem like a helpful delay, but Shannon explains why it's better to avoid them. Here’s a look at why timely tax filing is crucial for your business.
The Importance of Timely Filing
Tax extensions extend your paperwork deadline, not your payment deadline. Shannon emphasizes, “Your payment was also due back in April.” Delaying the paperwork can lead to unexpected interest and penalties, which can be a nasty surprise.
Planning and Proactivity
Timely filing is key for effective business planning. Shannon notes, "It holds up your planning." Without your prior year's tax return, preparing for the current year becomes difficult. This stymies business growth and strategic planning. Shannon’s firm practices “pro forma tax returns” to forecast your potential tax liability. But without last year’s data, these forecasts are less accurate.
Operational Impact and Memory Issues
Delaying your tax filing can also disrupt daily operations. Shannon points out, “It sure as heck doesn’t get any easier to remember what the hell you spent money on in 2023 the deeper we get into 2024.” The longer you wait, the harder it is to recall financial details, leading to inaccuracies and missed deductions. Shannon likens this to yanking a puppy on a leash, disrupting forward momentum and delaying critical future-focused activities.
Financial Costs of Filing Extensions
Many accountants charge fees for filing extensions. Shannon advises discussing this with your accountant to avoid surprise charges. “There are plenty of accountants that charge you for extensions, whether they tell you or they don’t,” she warns. Her practice opts not to charge for extensions but encourages clients to be prepared ahead of time.
Securing a Reliable Accountant
Finding the right accountant is crucial. Shannon created the "Money Pro Matchmaker" to help business owners find accountants who understand their needs and offer fair pricing. "Do not get stuck or screwed with the wrong accountant," she advises. This guide helps entrepreneurs ask the right questions and set clear expectations with their accountants.
Taking Control and Moving Forward
Shannon stresses the importance of taking control to prevent the need for extensions. Engage in proactive conversations with your accountant and set clear deadlines. "The choice is yours," she emphasizes. By expressing your intent not to extend and committing to timely preparation, you can save time, money, and mental space.
Understanding the broader implications of a tax extension is crucial. Shannon Weinstein’s advice emphasizes preparation, timely filing, and effective collaboration with a reliable accountant. By avoiding extensions, you set your business up for smoother operations, better planning, and long-term growth.
What you'll hear in this episode:
05:24 Business return affects personal return, timing crucial.
06:25 Stay focused on the future, avoid distractions.
09:47 Extend by May 31, focus on growth.
If you like this episode, check out:
Think Twice Before Forming a Multi-Owner Business
Moving to a Tax-Free State - Worth it?
A Shortcut to Business Travel Deductions
Want to learn more so you can earn more?
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Watch this episode and more here: https://www.youtube.com/channel/UCMlIuZsrllp1Uc_MlhriLvQ
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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.
