As a taxpayer, you might feel a bit uneasy when your CPA suggests filing for a tax extension. However, it’s essential to understand the reasons behind this advice and recognize the potential benefits it can offer. Let’s explore the advantages of filing a tax extension and debunk the myth that it’s a sign of trouble.
Reasons Your CPA May Suggest Filing an Extension
1. Ensuring Accuracy and Thoroughness
During the busy tax season, which is approximately three months long, tax accountants work tirelessly to prepare accurate tax returns for their clients. With a limited timeframe and many clients to serve, your CPA may need more time to review your documents and financial situation thoroughly. An extension allows them to do just that, ensuring you receive the best possible result on your tax return.
2. Missing Documentation
If your CPA hasn’t received all the necessary documents to prepare your tax return, they may suggest filing for an extension. This additional time enables you to gather the required paperwork and provide your accountant with the information needed to complete your return accurately.
3. Corporate Tax Return Delays
For individuals who own businesses, the personal tax return cannot be completed until the corporate tax return is done. If there are delays in finalizing the corporate tax return, it will automatically cause delays in the personal tax return. Filing an extension provides a buffer to ensure both returns are completed accurately.
Understanding the Implications of a Tax Extension
It’s important to remember that a tax extension does not grant extra time to pay any taxes owed. It only provides an extension for filing the required tax documents. You are still required to pay your taxes by the original due date, and penalties and interest may apply if taxes are not paid on time, even if an extension has been granted.
The Benefits of Filing a Tax Extension
1. Reduced Stress
Filing an extension can significantly reduce the stress associated with tax season. With additional time, your CPA can carefully review your entire situation, ensuring you take advantage of every possible opportunity to reduce your tax liability.
2. Improved Accuracy
When your CPA has more time to review your documents and financial situation, they can identify deductions, credits, and other tax-saving opportunities that may have been overlooked in a rush. This additional time can lead to a more accurate tax return, which may ultimately save you money.
If your accountant recommends filing a tax extension, don’t panic. Instead, consider the potential benefits, such as improved accuracy, reduced stress, and a more thorough review of your financial situation. By understanding the reasons behind this suggestion, you can feel a sense of relief knowing that your tax return is in capable hands.
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