As April 15 creeps closer and closer, your accountant may tell you that your tax return is going to be extended. Extending your return provides an additional six months to complete your return, with a new due date of October 15, 2022. You’ll still need to pay any estimated tax amount due by the original due date of April 18, 2022 (a couple of days later than the usual April 15 deadline due to the Emancipation Day holiday in DC).
There are many reasons your return may need to be extended, among them:
- You may still be waiting on tax forms such as K-1s or corrected 1099s
- Your tax information was submitted without enough time for your accountant to give your tax return the attention it needs to ensure its accuracy
- You may have a complex tax situation due to transactions conducted during 2021
There are actually some advantages to extending your return, including:
- Extending your return allows for more insight into the current tax year and helps your CPA recommend tax elections that could result in less tax overall for the two year period
- Qualified retirement contributions (such as a match or profit sharing contribution) are not due until your tax return filing date, including extensions
- It’s usually less expensive to file an extension rather than rushing to complete your return, only to have to file an amended return later due to new information
- If there’s pending tax guidance or legislation that affects your tax situation, your CPA may recommend extending rather than amending your return later
There’s no penalty for filing an extension, and it doesn’t make your return more likely to be audited by the IRS.
You’ll still want to provide your accountant with whatever tax information you DO have so that he or she can draft your return and determine your anticipated tax payment (or refund). If you make quarterly estimated tax payments, your CPA may suggest you pay both your 2021 balance due as well as your first quarter estimated tax payment with your extension.
For questions regarding the tax situation for your business, contact us.