Don’t Panic! You Can Get More Time To File Your Taxes!

The tax deadline for 2023 taxes is Monday, April 15th. If you haven’t gotten around to filing and think you’ll just pop by a tax preparer this weekend, don’t be surprised if they can’t help. If you do them yourself and expect to file them at 11:59pm that night, maybe it’s a better idea to file an extension so you can relax a bit and not make any careless mistakes.

Filing an extension is not cheating or a failure, it’s a way to make sure you complete your taxes right the first time. And the fact is many small businesses and self-employed people file extensions simply because they don’t get all of the information they need from other people in time to complete their taxes before the deadline. Filing for an extension gives you 6 additional months, which should be plenty of time.

Remember that asking for an extension doesn’t mean you get an extension on the time to pay. This means you need to estimate how much you think you’ll owe and then make that payment by April 15th. If you don’t know how much it’ll be and haven’t made any estimated payments throughout the year, you may want to look at past tax returns to see how much tax was due and see if that’s manageable. If you don't pay enough, however, you'll owe interest and potentially other penalties for not paying on time. If you pay more than is actually due, you can get a refund on the excess that you paid or you can apply it to next year’s taxes, reducing the amount you pay in estimated payments. This is why it might be a good idea to pay more than you expect.

How to file an extension:

Most tax software programs allow you to file your extension online or print out the form to mail. You can make a payment online with the IRS at https://www.irs.gov/payments using your bank account, debit card, credit card, etc. If you don’t already have an account set up with the IRS, you can use information from a prior tax return to verify yourself.

If you’re having trouble paying online, it’s often easier to fill out the extension form from the IRS to print and send a physical check in the mail. It’s usually a good idea to send that using Certified Mail so you have verification that you sent it on time. If they ever claim you didn’t file your extension, sending that receipt as well as the USPS information on when it was delivered will generally resolve any issues or penalties for not filing an extension.

Some states will automatically consider an extension filed with the IRS as an extension for the state as well; however, you should probably check with your state to make sure. Alternatively you can manually file an extension with the state. This is an especially good idea if you’re going to make a tax payment.

What about business extensions?

If you have a sole proprietorship or have a single owner LLC, filing your extension for your personal taxes includes the extension for the business. If you have multiple LLCs and are the only owner of each one, all of those businesses are covered as well.

What If you have an S-Corp? The bad news is that you’re already late. S-Corp taxes or extensions were due March 15, 2024. If you haven’t filed your taxes yet, the best option is to get them filed as soon as possible as “the failure-to-file penalty is usually five percent of the tax owed for each month, or part of a month that your return is late, up to a maximum of 25%”. States have their own late filing penalties as well, so it’s best to check on them.

What’s next?

If 2023 is the first year you’re filing taxes while self-employed or as a business owner, you may have a lot of questions. What is the line between business and personal? What can be deducted as business expenses? What can’t be deducted? How should certain expenses be classified? Can you deduct your car or apartment or house? If you have these questions, reach out to Brightleaf and we’ll work with you to give you answers. We’ll also work with you to make your 2024 taxes much easier and faster to file while also helping you look at the finances so you can make better decisions for your business. We can also share ways to reduce the amount of taxes you pay while putting more money away for your future. You’re good at what you do and want to help your clients… and we’re good at accounting and helping businesses grow and succeed.

- John Thrush