Blog: Can We Have Some Order Here?
When It's Good To File A Tax Extension
As everyone was busy updating Quickbooks and gathering receipts and filling out income tax forms last week, I solidly was not. In fact, I won't worry about getting my tax papers to my accountant until sometime in early fall. What makes me so special? I file an automatic extension every year -- on purpose.
I love my accountant -- but the first time he did my taxes and told me he was filing an extension on my behalf, I was livid! I assumed that my CPA had overextended himself, and was making me look bad because he couldn't stay on top of his workload. I was mortified at the idea that I would be viewed as a slacker or ne'er-do-well by the IRS. I said, "I'm a Professional Organizer, I have my bookkeeping up to date, I have all of my records in order -- I don't need no steenking extensions!" Then after I'd finished my temper tantrum, my accountant calmly explained to me that he was doing this for my own good, as a small business owner.
It's an unfortunate irony that self-employment is such a great way to rack up legitimate deductions, while many of these mainstays of the small business tax return (like travel costs and home office expenses) also increase your likelihood of being audited. However, filing an extension can balance out these "risks" and protect you from potential scrutiny by the IRS. How is that possible? Most financial advisors recognize that the routine audit system is first-come, first-served -- those who file promptly are the first picked for an audit, while those who get their paperwork in after all the quotas have been filled stand a better chance of being overlooked. Of course, I'm only referring to random audits, not those related to a gross oversight or possible fraud -- if you're counting suspicious business expenses or fudging your numbers, you'll eventually get audited no matter how late you file!
Procrastination can also benefit you in other ways -- if you're feeling pressured for time, it's better to submit an extension than be in such a rush that you slap any old figures together on your return. Sloppy accounting is bound to get you in trouble -- filing an extension allows you to double chck your calculations and be thorough about your deductions. Plus, think about how crazy things are for professional number-crunchers in the weeks leading up to April 15th. That simple little piece of paper gives your accountant a 6-month break -- and a less-harried CPA is always less likely to make a mistake on your return. Tax time -- the one instance in life when the early bird does not catch the worm!
Of course, extensions are also there to help you out if some sort of emergency comes up during tax time -- or if your paperwork is so disorganized that you couldn't get it all in order even if you wanted to file on time (if you request that extension for the second reason, you need to talk to me about setting up a system to help you stay on top of your tax records throughout the year!) It's a relatively simple matter -- a single IRS Tax Form 4868, sent in prior to April 15th. As long as you have paid any taxes you owe for the year by that time, there is no penalty to filing an extension -- and it gives you another half a year during which to get your act in order, no questions asked. Unless you're trying to cash in as quickly as possible on a big tax refund, there's almost no reason NOT to file for an extension!
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posted on: 9/1/2011 11:30:00 AM by Ramona Creel
category: General Organizing Tips
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Can We Have Some Order Here?
by Ramona Creel
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I have been a Professional Organizer for more than 10 years, I am a NAPO Golden Circle member, and I was the original founder of OnlineOrganizing. I have worked one-on-one with scores of clients and have trained dozens of newbie organizers as they got started in the industry. I provide both hands-on and virtual coaching to help clients improve their organizing skills and simplify their lives. I invite you to visit my website at http://www.RamonaCreel.com, and I challenge you to find one new idea that you can put into practice in your life, to help you become better organized, starting TODAY! I am passionate about coaching folks toward a more balanced, productive, and enjoyable life -- and I firmly believe that if I can do it, so can you!
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