How to Avoid Filing an Extension: Consulting a Tax Advisor and Other Strategies

The tax return deadline is looming. You’re rushing to gather every piece of paperwork needed to file your taxes. But despite your best efforts, you realize you won’t make it in time. Filing an extension is the last thing you want to do, but sometimes, it just happens. This situation can be quite daunting for a small business that doesn't have a tax advisor.

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Small business owners often struggle with tax deadlines for various reasons, such as missing receipts and invoices, incomplete recordkeeping, or simply not knowing where to begin. However, relying heavily on extensions is a symptom of a deeper problem. It can mean your accounting is not optimized, which can cause future cash flow issues. Worse, it can result in late tax filings with penalties and interest charges.

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In this article, you’ll learn key strategies to avoid filing a tax extension. From organizing your financial records to hiring experts, you’ll be better equipped to handle your taxes. Isn’t it about time you stopped dreading the tax season?

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Seven Key Strategies to Avoid an Extension

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Proactive planning and organization are essential to filing taxes on time. Streamlining your financial records through technologies and expert advice can help avoid extension requests.

Here are some strategies:

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1. Prepare Early

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Procrastination can spell the difference between last-minute scrambles and stress-free submissions. Here’s how to prepare in advance:

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• Set Up a Tax Calendar with Reminders: Besides manually scheduling the deadlines on your calendar, the IRS has an online tax calendar you can use. You can subscribe to or import the calendar to your email, such as Microsoft Outlook.
• Gather Documents in Advance: Check that you have all the necessary receipts, invoices, and bank statements at least a month in advance. You can also schedule document gatherings on your calendar.

2. Regularly Organize Financial Records

Keeping your documents organized as soon as you receive them is half the battle won. You’ll immediately notice if anything is missing. Here’s how to keep organized:

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• Digitize Your Records: You can scan or take pictures of your invoices and receipts. Even better, there are tools that automatically capture these documents so you never lose them.
• Schedule a Day to Go Through Your Records: While it may be daunting to do this once a month,  it will save you a lot of headaches in the long run. The earlier you start, the better

3. Ensure You Understand Your Tax Liabilities, Obligations, and Laws

Tax laws can be overwhelming, but understanding them is crucial. This knowledge helps prevent underpaying and informs you about available tax credits and deductions. Here are some ways to learn more about your tax liabilities:

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• Attend local tax seminars or workshops.
• Join a small business community to get updated on your specific industry.
• Take short online courses.
• Subscribe to newsletters and emails from reputable small business and tax advisors.

4. Use Software and Tools

There are many software out there that can make tax filing a breeze. Here are some tools to check out:

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• Accounting or bookkeeping tools that record your transactions as they happen and automate your invoicing and reconciliation.
• Tax filing services that take care of your form submissions and advise you on extensions and deductions.
• Expense management software that categorizes your expenses based on uploaded receipts.
• Invoicing support services that automate your billing and invoicing so you can keep your accounts receivable low.

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5. Hire A Tax Advisor

While it’s important that you know the tax filing process, it’s equally crucial that you have professionals to consult and partner with. Tax advisors and accountants can provide expertise and peace of mind. Here are the other benefits of outsourcing to experts:

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• They have the right certifications and experience.
• They stay current with the latest regulations and technologies.
• They can help you optimize your tax planning, credits, and deductions.
• They can represent you during audits to ensure your interests are protected.

6. Conduct Internal Audits

Regularly auditing your entire financial records can flag problems before they escalate. Plus, it keeps the IRS from knocking at your door. Here’s how to conduct internal audits:

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• Schedule quarterly reviews to check for inconsistent or unusual transactions.
• Review your business processes to see if there are better ways to collect payments or keep expenses down.
• Document your findings so you know which areas to improve on.

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7. Prepare a Checklist for Filing

A comprehensive checklist ensures you’re not missing any requirement or important information. Here are some forms to include in your checklist:

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• Form W-2 records your employees’ incomes.
• Form 1099 NEC and MISC record payments to non-employees like freelancers and independent contractors.
• Form 720 is required for businesses that pay federal excise taxes, such as fuel and retail taxes.
• Form 940 reports how much you contributed to your employees’ unemployment insurance.

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Consult with a tax advisor to know all the tax forms that apply to your business and industry.

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Common Mistakes to Avoid

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Part of knowing how to file your taxes properly is avoiding mistakes that can cost you time and fees. Here are some things to avoid:

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• Not Opening a Separate Business Account: When you don’t know which funds go specifically to your business, it can be hard to claim deductions.
• Underpaying Your Estimated Taxes: According to the IRS, you should pay estimated tax payments if you expect at least $1,000 in tax liability. Underpaying could result in a penalty.
• Not Depositing Employment Taxes: Don’t forget to include the taxes you withhold from your employees.
• Not Including All Your Income: Ensure you report income from all your revenue streams and business bank accounts.
• Not Claiming Your Tax Credits and Deductions: You might not keep receipts to support your claims if you don’t know which expenses can be considered as write-offs.
• Not Attaching the Right Forms: Ensure that you submit the forms with the most updated information. Download them from the IRS website or a professional tax advisor.

What to Do If You Still Need an Extension

Don’t worry—if you absolutely need it, you can still file for an extension. However, remember that this extension only applies to filing your taxes, not to paying them. You must still pay your taxes on time to avoid penalties. Here’s how to file an extension:

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  • Form 7004 (for Corporations, S corporations, multiple-member LLCs, and partnerships)
  • Form 4868 (for sole proprietors and single-member LLCs).
• Submit the form and pay the tax due. You can pay via the Electronic Federal Tax Payments system or a tax filing service.

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An extension usually gives you six more months to file your returns. Use that time wisely!

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Partner with Decimal to Avoid Tax Extensions

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You don’t have to be afraid of tax deadlines. Decimal’s tax advisor services can help your small business stay organized, prepared, and ahead of due dates. Our team can help you in tax planning, ensuring that your books are updated. Our experts know how your company can take advantage of tax deductions and credits so you can allocate those funds for growth instead.

‍Schedule a meeting with us and say goodbye to tax extensions!