April 15. This is the deadline set by the IRS for filing your personal tax return. (It’s usually April 15; this year, it happened to be pushed back to April 18, as a result of the 15th falling on a Saturday and then the observance of Emancipation Day in Washington, D.C. the following Monday, but that is a different story). As most of us know, the IRS allows taxpayers to file an extension granting six additional months (usually to October 15… Because this date falls on a Sunday this year, the extension deadline is October 16). But, and this is a big but, the extension grants only additional time to file, not additional time to pay. This point should be made abundantly clear to taxpayers, because no one wants to be hit with late payment penalties. And most of us seem to completely disregard the first five months and push off getting our tax information to our preparers until we glance up at the calendar and realize we are almost out of time.
This is a dangerous game to play, for multiple reasons.
Most preparers have a full docket of work from the end of summer right through the extended due date. This is due in part to procrastination of taxpayers and preparers, as well as a schedule in which multiple deadlines occur in rapid succession. The deadline for pass-through entities is September 15 (just one month prior to the deadline for personal returns), and trust returns are due September 30 (just two weeks prior). When some of the information required isn’t available, this can create a butterfly effect.
Not all of the required information may be immediately available, but this is not a good reason to neglect sending over the readily-available information to your preparer.
Add the overwhelming amount of work to the complexity of tax law and expertise required to properly prepare a tax return, and one can see how there is an increased likelihood of errors, omissions, and/or missed opportunities. This is a serious no-no for tax professionals.
The more time a preparer has to consider options and the presentation of facts, the more value can be added. Additionally, there is greater opportunity to consider actions that can be taken in the subsequent year (which we are usually in the middle of when we are looking at last year’s information) or future years that can be favorable to the taxpayer. Timing matters.
For estimated taxpayers, timing is of increased importance. If your tax liability has changed and the prior year’s tax has been underpaid or overpaid, waiting until the deadline could leave you having paid three quarters of estimated taxes at the incorrect amounts. This can result in penalties for underpayment of estimated tax or, even worse, giving excess interest-free loans to the government (oh, the humanity!).
None of the above addresses a more intangible issue, which is finality; crossing something off a list. Getting your return filed offers just such a feeling, and I urge you to experience it. Your preparer will thank you, too.
Bottom line? Don’t treat the filing of an extension as permission to procrastinate for six months, but rather just a short window to have everything lined up to comfortably make the extended due date in spite of any outstanding information.