In the context of taxes, business owners treat the word “extension” like poison. Extensions are things that everybody thinks they want to avoid at all costs, but they don’t know much about them.
Are extensions really all that bad?
At CSI Accounting & Payroll, we’ve worked with small business taxes for over 50 years. In all that time, we’ve heard a variety of questions about extensions, such as:
No, extensions are not inherently bad. Does that answer surprise you? You’re not the only one; a large portion of business owners think extensions are only negative.
It’s better to get an extension than to face penalties for filing your taxes late without an extension. They aren’t red flags to the government, and they will not trigger an audit.
The only downside is that if you owe money, it’s still due on the same date. The extension only gives you extra time to file the paperwork. This gives you little time to prepare if the amount is larger than expected.
However, you should examine the situation that led you to the extension. Did you need to file an extension for yourself, or did your accountant place you on an extension?
The biggest question of all is: Why?
Yes, it’s bad if you need to file for an extension for yourself. In fact, this is one of our top 10 signs your business is ready for accounting services.
If you were trying to file your own taxes but had trouble getting your information together on time, you need to consider working with an accountant.
Falling behind can be caused by factors like confusion and a lack of time. Some things are less DIY-able than others, and your expertise is in running your business, not filing your taxes. There’s no shame in admitting you need help!
However, it’s an entirely different situation if you’re paying a professional accountant who’s putting you on an extension.
It depends. This situation is a bit more complicated. Who is to blame: your accountant, yourself, or the situation?
If you’ve worked with your accountant for a while and provide all of the necessary information on time, there’s no reason to place you on an extension. If they don’t have time for you, then you should consider a different solution.
Otherwise, if you’re onboarding during peak tax season or were late to provide your information, then it makes sense if they need to put you on an extension.
Regardless of the reason why your accountant needs to place you on an extension, if they communicate your deadlines and responsibilities to you, you’ll be fine for now. Just make sure you tackle the problem for the future – and don’t procrastinate!
Now that you know about the good and the bad of extensions in different situations, are you ready to check out monthly accounting services?
If so, please consider CSI Accounting & Payroll! We’ll never place you on an extension if we have your information on time. To see if we can be a good fit for your business, click the button below for a free consultation:
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