We are quickly approaching critical tax deadlines: March 15th for passthrough entities (partnerships and S-corporations) and April 15th for individual, C-Corporation, and trust returns. It’s important to consider what strategy makes most sense moving forward. In most situations, we encourage clients to file before these deadlines to avoid the need for an extension payment and to ensure everything is wrapped up early. Filing on time also allows us to shift our focus toward proactive planning for the current year. With that being said, there are times when filing an extension is the better option. An extension provides time for last-minute planning, such as making prior-year retirement contributions, evaluating accelerated depreciation on newly placed-in-service assets, or deferring depreciation to future years. Filing an extension also allows you, in certain situations, to file a superseded return instead of an amended return, even if you ultimately file before April 15th. This provides additional flexibility in correcting your original filings.
If you are still waiting on late or corrected tax documents, have a complex financial situation that requires additional time to address properly, it may be worthwhile filing an extension.
If your return is not filed before the deadline, we will file an extension on your behalf to ensure you have this allotted additional time. Filing for an extension eliminates the Failure to File penalty which is one of the heftiest IRS penalties. It is important to understand that if you expect to have a balance due on April 15th, this must all be paid in full to avoid any late payment and interest penalties.
What Needs Done?
If you believe you will not be able to have your return filed in time, please let your advisor know as soon as possible. This allows enough time for us to calculate an extension payment for you along with your Q1 estimated payments which are also due on April 15th.
To ensure we are not kicking the can down the road to the September and October deadlines, we recommend staying on top of any outstanding tax documents and scheduling a meeting with your advisor to determine what strategy makes the most sense for you. The most effective way to stay on track is by treating the extension period as a normal part of tax season rather than waiting until the last few weeks to send documents.
If you have any questions, please feel free to reach out to your advisor, and we’re happy to set up a meeting!