How Extensions Work
Maybe you felt overwhelmed by the earlier tax deadlines and were concerned about missing out on potential tax benefits by rushing to file. That's where extensions come into play.
By extending your filing deadline, you gained extra time to gather all necessary documents, ensure accuracy, and maximize your tax savings.
But it only works if you file by the extension deadline.
Miss it, and there is an expensive price to pay.
Each year, I find that people still aren’t ready because the request for more time gets filed right before the school year ends, and expires immediately after school begins again. In between is summer vacations, the time people typically won’t have taxes on their mind! Next thing you know, it’s time to file again. The time just gets away from us.
Each year, I find that people still aren’t ready because the request for more time gets filed right before the school year ends, and expires immediately after school begins again. In between is summer vacations, the time people typically won’t have taxes on their mind! Next thing you know, it’s time to file again. The time just gets away from us.
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Lastly, we have sole proprietors and single-member LLCs that use Schedule C as part of their individual tax return (Form 1040).
The extended due date for these businesses aligns with individual income tax returns - October 15th.
The extended due date for these businesses aligns with individual income tax returns - October 15th.
It's important to note that while these are general guidelines for most businesses, there may be exceptions or special circumstances that could alter these deadlines.
Consult a qualified professional or refer directly to IRS guidelines when determining specific deadlines for your business entity.
Consult a qualified professional or refer directly to IRS guidelines when determining specific deadlines for your business entity.
Failure to File - Penalties
If you file after the deadline and you have tax due, you will be assessed a penalty of 5% for each month late up to 25%. So that's like 5 months of penalty on late tax. Taxes that remain unpaid for a month (or part of a month) will be assessed a failure-to-pay penalty of 0.5% per month.
Filing penalties for S corporations and Partnerships can get really steep and fast!. Even though neither entity pays tax, not filing on time can incur a penalty from the IRS of $210 for each person who was a partner or shareholder at any time during the year, for each month or part of a month for up to 12 months.
The IRS also charges interest on penalties, so you can see how important staying on top of the deadlines can be!
To learn more about penalties & interest, visit https://www.irs.gov/payments/failure-to-file-penalty
Filing taxes can be a daunting task, but with the right approach, it can become more manageable. In the next sections, you will learn a 3-step process you can use to feel more on top of things. By following these steps, you can ensure accuracy and maximize your deductions.
Filing taxes can be a daunting task, but with the right approach, it can become more manageable. In the next sections, you will learn a 3-step process you can use to feel more on top of things. By following these steps, you can ensure accuracy and maximize your deductions.
Step #1 Gather All Documents and Information
The tax deadline can often create a sense of urgency, and rightfully so. But it's important not to rush through this process. Taking the time to gather all your documents and information beforehand can save you from potential headaches and errors later on.
When it comes to facing taxes, one of the most crucial steps is gathering all the necessary documents and information. In other words, get organized before you touch any tech.
This ensures that you have everything you need with nothing missing so you can accurately report your income and claim any deductions or credits that you may be eligible for in a seamless way and without feeling “all over the place.”
This ensures that you have everything you need with nothing missing so you can accurately report your income and claim any deductions or credits that you may be eligible for in a seamless way and without feeling “all over the place.”
1. Income
Start by gathering documents that show income for the year and group them together in one stack. This typically begins with W-2 forms if you, or a spouse you file jointly with has a job. Having these documents readily available will make it easier to accurately see all your income.
While employees get W-2 forms which report total earnings for the year, it’s more complicated for you as an entrepreneur to know your true earnings. You may have a job, but your business is another source of income, so in addition to W-2(s), make sure to collect other relevant forms such as 1099s or K-1s.
You’ll also need banking and other statements from 3rd party payers like Paypal, Zelle, ApplePay, CashApp and Square to determine and support income.
2. Deductions
Deductions are expenses you incurred that can reduce your taxable income, and they come in various forms, starting with basic receipts showing expenditures to official tax forms and statements received by mail or email throughout the year.
So gather together, in a second stack, any documentation that shows amounts for deductions or credits you plan to claim. This may also include receipts for charitable donations, medical expenses, and of course, business-related expenses.
So gather together, in a second stack, any documentation that shows amounts for deductions or credits you plan to claim. This may also include receipts for charitable donations, medical expenses, and of course, business-related expenses.
Don't forget about other important documents such as mortgage interest statements, student loan interest statements, and records of any other income and expense sources like rental properties or investments.
By being proactive in collecting these documents and information ahead of time, you can ensure a smoother tax filing process. It also allows you to take advantage of all available deductions and credits while meeting the tax deadline with confidence.
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Step #2 Calculate & Get Totals By Category
When you filed your extension, this step was likely the hold-up. You didn't want to leave money on the table and miss out on deductions, but you needed to initiate action on your end to gather the totals for the return.
This involves adding up all your income from various sources such as employment wages, self-employment income, rental income, dividends, interest, and investment income. It is important to accurately report these figures to avoid any discrepancies or potential audits.
Furthermore, calculating deductions and credits plays a significant role in reducing your overall tax liability.
Deductions such as business expenses, mortgage interest payments or medical expenses can help lower the amount of taxable income.
Deductions such as business expenses, mortgage interest payments or medical expenses can help lower the amount of taxable income.
So whether you're meticulously adding up receipts by hand, crunching numbers on spreadsheets that do all the calculations for you, or relying on our favorite, accounting software, there's no denying the importance of those all-important totals.
They're the backbone of your business's financial journey, the gateway to making informed decisions, but for taxes, the secret weapon to keeping your money! Don't let a single deduction slip through the crack - or you’ll find yourself giving away your rights to pay less tax!
They're the backbone of your business's financial journey, the gateway to making informed decisions, but for taxes, the secret weapon to keeping your money! Don't let a single deduction slip through the crack - or you’ll find yourself giving away your rights to pay less tax!
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That said, it’s pretty gutsy trying to learn technology while trying to file taxes by a deadline.
Not only does it add to the stress of it all, but it may not be justified.
For example, if there's a long learning curve for you, if you're filing for back years, maybe you don't have much volume or keypunching would be too labor intensive.
These are the times to consider skipping the fancy and just sticking with pen and paper. Just be sure and triple check those numbers!
Not only does it add to the stress of it all, but it may not be justified.
For example, if there's a long learning curve for you, if you're filing for back years, maybe you don't have much volume or keypunching would be too labor intensive.
These are the times to consider skipping the fancy and just sticking with pen and paper. Just be sure and triple check those numbers!
Type 1: Business deductions
If you're in business, you need a system that gives you reports, not just to file this year’s taxes, but for current year activity, and future years’ also.
Rather than going manual one more year, and since we offer a free accounting system setup here, why not seize the opportunity to automate and make up for lost time?
With technology taking care of the entry and the calculations, you can wave goodbye to errors and embrace efficiency.
With technology taking care of the entry and the calculations, you can wave goodbye to errors and embrace efficiency.
Some accounting software solutions offer the incredible advantage of seamlessly integrating with your tax software, automatically feeding in the totals.
This not only saves you precious time but also streamlines your entire process, eliminating duplicated tasks and reducing the risk of manual errors.
This not only saves you precious time but also streamlines your entire process, eliminating duplicated tasks and reducing the risk of manual errors.
Whether you opt for one of our innovative software courses or another reliable choice, it is important to understand that this step holds immense significance in saving you time.
Reports will make a remarkable difference in your financial management year round, then help you maximize deductions and minimize potential errors at tax time.
Reports will make a remarkable difference in your financial management year round, then help you maximize deductions and minimize potential errors at tax time.
By adopting such advanced accounting tools, you empower yourself to navigate the complex world of taxes with ease and efficiency.
So go ahead and embrace the power of technology to optimize your financial success!
So go ahead and embrace the power of technology to optimize your financial success!
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Type 2: Other deductions
Look for any potential non-business deductions or credits that you may qualify for that won’t appear in business accounting software.
This could include expenses related to education, healthcare costs. We offer a method for clients to still capture them in software but keep them separate from the business reporting.
Organizing these expenses in whatever way you choose will help you claim even more deductions and reduce your taxable income even more.
This could include expenses related to education, healthcare costs. We offer a method for clients to still capture them in software but keep them separate from the business reporting.
Organizing these expenses in whatever way you choose will help you claim even more deductions and reduce your taxable income even more.
Taking these steps now will save you time and stress as the deadline approaches while also potentially maximizing your tax savings.
Type 3: Those Resulting From Situation or Tax Law Changes
Additionally, consider reviewing any changes in tax laws or regulations that may impact your filing status or eligibility for certain credits or deductions.
Staying informed about current tax laws ensures that you are taking advantage of all available opportunities to minimize your tax liability.
Each year we provide returning clients with a checklist and an organizer that allows them to scan for various areas and answer yes or no to questions about events that happened throughout the year, in case they can help reduce the liability.
Staying informed about current tax laws ensures that you are taking advantage of all available opportunities to minimize your tax liability.
Each year we provide returning clients with a checklist and an organizer that allows them to scan for various areas and answer yes or no to questions about events that happened throughout the year, in case they can help reduce the liability.
Step #3 Review & Finalize
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Before filing your tax return, it is crucial to carefully examine all the information you have entered.
This includes verifying personal details such as your name, address, and social security number.
Additionally, double-checking your income sources and ensuring that you have included all relevant forms and documents is essential.
This includes verifying personal details such as your name, address, and social security number.
Additionally, double-checking your income sources and ensuring that you have included all relevant forms and documents is essential.
By carefully calculating totals as mentioned in step 2 above, then reviewing your inputs you are taking proactive measures towards accurate reporting and potentially minimizing your tax liability.
Remember that attention to detail is key when it comes to filing taxes successfully.
Remember that attention to detail is key when it comes to filing taxes successfully.
Get Help From a CPA
When it comes to filing taxes, seeking out the professional assistance can be a wise decision.
While many individuals choose to handle their taxes on their own, there are certain situations where the expertise of a CPA can make a significant difference.
While many individuals choose to handle their taxes on their own, there are certain situations where the expertise of a CPA can make a significant difference.
One huge advantage to outsourcing your taxes is peace of mind. By entrusting your taxes to an experienced professional, you can have confidence that they will be handled correctly and efficiently.
This allows you to focus on other important aspects of your life without the stress and worry that often accompanies tax season.
This allows you to focus on other important aspects of your life without the stress and worry that often accompanies tax season.
Filing taxes can be complex and time-consuming, especially if you own a business, have multiple sources of income, investments, or if you own a business.
As CPAs, we:
- know what areas to look for, so we can work shortcut the process, work faster, and more efficiently, especially if filing back taxes.
- navigate through the intricacies of the tax code and help you maximize your deductions and credits, potentially saving you money in the process.
- stay up-to-date with the ever-changing tax laws and regulations. This means we are well-equipped to identify any changes that may affect your specific situation and ensure that your return is accurate and compliant.
Need Direct Help?
In conclusion, while some individuals may feel confident in handling their own taxes, seeking professional assistance is a prudent step for many.
The expertise, knowledge of current tax laws, potential cost savings, and peace of mind we provide makes us an invaluable tax resource during the filing process.
The expertise, knowledge of current tax laws, potential cost savings, and peace of mind we provide makes us an invaluable tax resource during the filing process.
If you have any further questions or need assistance with anything else related to taxes, contact our founder, Mildred Dillon CPA here: www.bit.ly/mdtaxquote
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