If you’ve filed federal and state tax extensions for 2021, don’t be inattentive and leave your final tax filing until October 17th. Your tax extension is really a time for you to focus on organizing your financial records and avoid any future penalties.An important reminder is an extension to file is not an extension to pay if you owe. You should have calculated what your tax liability would have been and sent a payment to the IRS to avoid interest and penalties. If you couldn’t pay the full amount, pay as much as you can, and the amount of interest and penalties would be mitigated. Any payments made after April 18th can still be credited to your 2021 return. Regardless of when you make the payment/s, document the date, the date the check was cashed or electronically made, and save that information for when you file your return. The same would apply to your state payments. If you are receiving a refund there are no penalties, and it will be paid when you file your return.
Look at the next six months as a window of opportunity to plan and get organized, not only for the filing of the tax return but also to determine if estimated taxes are required for the upcoming tax year. One of the first things you should do is get all your tax documents together. This will make it much easier to manage your return, and you may find that getting everything together now will help you beat the pre-deadline rush. This is also the time to address any open items from your accountant.As you are organizing you may also be able to develop a system for keeping all your documents in order and prepare to be more proactive about filing next year. Getting everything in order may also help to file a more accurate tax return, as you will have more time to determine which tax deductions apply to you and which do not.
For business owners who filed for an extension for their corporate or partnership returns, the next six months is a good time to evaluate internal systems and documentation. This is also the time to finalize the K-1 information, and provide to all participants, so they can file accurate returns.For those self-employed, filing an extension can also provide more time to contribute to a retirement account. Normally, contributions to a Solo 401(k) plan or Simplified Employee Pension (SEP) IRA for the previous calendar year would have to be made by the original April filing date. However, if you get an extension to file your return, you also get an extension to make your contribution to your retirement account/s. Please remember if you have an extension, it’s advised not to wait until October 17th to file. If you can organize everything earlier, you should file before the deadline date. If you would like to discuss how your extension may affect your returns, Hart Vida & Partners can help. Please contact our Office Manager, Maria Mosa, at email@example.com or 914-617-7620 ext. 118, and she will put you in touch with a partner that can assist you.