In today's episode, we'll dive into a topic that affects many business owners around this time of year: tax extensions. We'll explore why you might want to avoid them, the hidden costs and delays they bring, and how proactive planning can set you up for success. Whether you're an entrepreneur who procrastinates or someone looking to streamline your financial processes, this episode is packed with insights to help you stay ahead. So let's get started!
What you'll hear in this episode:
05:24 Business return affects personal return, timing crucial.
06:25 Stay focused on the future, avoid distractions.
09:47 Extend by May 31, focus on growth.
If you like this episode, check out:
Think Twice Before Forming a Multi-Owner Business
Moving to a Tax-Free State - Worth it?
A Shortcut to Business Travel Deductions
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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.
(upbeat music) - Welcome to Keep What You Earned, your judgment and jargon-free zone for entrepreneurs of all levels. Get ready to learn how to scale your business, save money in taxes, and create a business that grows your wealth. If it feels like the financial side of business is like eating your vegetables, well, then think of this podcast as the ranch dressing to make the process a little more enjoyable. My name is Shannon Weinstein. I'm a CPA and business owner on a mission to simplify money and empower others through knowledge. I hope this episode inspires you to take action, but remember that the information we share is for educational purposes only and is not individual tax advice. Now that we got that out of the way, let's start the show. (upbeat music) So as we enter into September, one of the things that comes up all the time with business owners is this sort of looming shadow reminder that you filed an extension way back in March and April. And now is the time in the next couple of weeks to address that because September 15th is the business tax deadline for S-Corps and Partnerships. And October 15th is the deadline for extended individual returns and C-corporations. So as we go into this extended tax season for 2023, I wanna remind you why it's my fundamental belief and you don't have to agree with me that extensions suck. Why we wanna avoid extensions? And I'll tell you right now, right off the cuff, it has nothing to do with audit risk. There is no additional audit risk by filing an extension. There are actually some advantages to filing extensions depending on the circumstances. But I'm talking about the folks that file extensions simply because they want to procrastinate, simply because they have every ability in January, February, March, April to get their shit together and to give it to their CPA. They have every ability to do that and they just do not want to. They have more important things to do. So if you've just simply deprioritized it, but there's no actual dependency that is getting in the way of you filing your return, this one's for you because I want you to understand the risks and I want you to understand what decision you're making by filing those extensions and how it can impact you, okay? No shame, but I do want to make you aware and inspire you to potentially get more proactive next year. So number one, the reason why extensions can be tricky is because it holds up your planning. So there are a couple of things that come into play with extensions I want you to be aware of. So let's talk about 2023. Your tax return was due in mid-April 2023 or 2024, excuse me, related to the 2023 tax year. So it was due in April 2024. What most people don't realize is that your payment was also due back in April. So the extension applies to the paperwork, not the payment, but it's like a cash 22 because it's like wage hand. So you're telling me that I was supposed to pay it six months ago? How the F do I know what to pay? I don't have the paperwork in front of me yet, exactly. So this is what makes it so tough is that most accountants, I have no idea why they do this. And sorry, accountants, I don't know why you do this. Why y'all disappear from January to August? Sorry, from June to August, I mean, from June to August. And I just don't understand it. I mean, I do because I had like the ASMR vacation, we worked really hard in taxis and you deserve it. I love that for you. I love that you're going on vacation. But here's the tough thing. For all the clients that filed extensions that they basically go on a three, four month laps where nothing gets done. And it's inhibiting business owners from making decisions, from getting out of that prior year mentality. And I do want to help them break free from that and enable them to plan for 2024. So one of the things we do with our clients every summer, we're doing them right now, is pro forma tax returns. And these pro formas are basically dress rehearsal tax returns we do for clients where we will do the tax return with certain assumptions for 2024. We're going to kind of guess it, ballpark it. And we're going to come up with some type of range to say, hey, we want to be ready for this type of tax liability. Just to give you a heads up, it's going to be between X and Y most likely. And we make it really clear that this is in pencil, not pen, but I wanted to throw something out there to have a plot point, even though we're kind of playing pin the tail of the doggy. But we can't do that. And we're running into this with certain clients is we can't do that exercise until we have the prior year return done. So it's really holding us up from doing proper planning and proactive assistance to our clients because we don't have the prior year data. We don't know what happened last year. So it's really hard to go off of. So selfishly, your new accountant will want that if you're doing any type of proactive planning. Even if it's the same person, you can't do any planning until the history is built. And it also can hold up your other filings. So if you've extended your S corp return or if you've extended your partnership return, and you'll know you have these 'cause they're called form 1065 or form 1120S. If you file either of those by March 15th or you extend in March, then they're going to be due in September. The problem is that both of these returns generate something called a K1. So it's kind of like a branch that gets ripped off of that return and gets added to your personal return. So you take this page out of the business return, then you use it to go finish your personal return. And unless we have that K1, that piece of the business return, we can't do the personal return and file it. So what's happening with a lot of clients and the clients I've seen in the past is that when your accountant doesn't do the business return, it doesn't do it on time. It holds up the whole process of you understanding your taxes, paying your taxes, getting your refund, and it can hold up a lot of stuff. So we really don't want that to get in the way. We want you to be able to just move forward and not dwell on the past, not be thinking about the past. And I'll tell you, it sure as heck doesn't get any easier to remember what the hell you spent money on in 2023, the deeper we get into 2024. We have been through so much in 2024 as a nation, as a world that I don't really remember a lot of stuff that happened in 2023 at this point. It's so far in the distance. So it's really important to make sure that you're saying on top of these things being proactive and that you're able to focus on the future. That's really my second point was, I wanna make sure that you can stop looking in the rear view mirror at what already happened and find yourself kind of getting tugged backward, trying to walk forward and finding, I kinda picture my puppy that we just adopted, like she wants to go forward so bad and then I like yank her back right on her harness. And then she kind of like stops in her tracks and has to circle back around and it slows her down. And this is what they're doing to you when forcing you to go back and look at 2023 or prior is they're yanking you on your forward momentum and saying, hey, come back here and look at this. And it's a bit of a distraction from what you're trying to do. And it can take away from the goals and the time that you should be spending on future planning instead of backward fixing up. So just keep in mind that there is a ton of cost to not fixing up the past because it's not just the task itself, but it's also what focus is this taking you away from? What could you accomplish in that time? What could you accomplish instead of dwelling on the past? And then finally, of course, the most literal thing is this can cost more. There are plenty of accountants that charge you for extensions, whether they tell you where they don't. So it's really important to understand what your fee structure is with your accountant because sometimes if they're gonna extend your return 'cause your stuff wasn't ready, they're going to upcharge you for filing that extension. Now we don't do that. I personally have never made the choice to charge for extensions because extensions in software typically take two seconds to file. We actually file them proactively. If we haven't filed your return by April 1st for individuals or by March 1st for businesses, we just assume we're gonna be extending and we do it proactively and we do it as kind of a preventive measure. So your accountant might be doing something similar, but you wanna make sure you're not paying additional fees for that, especially if you didn't authorize the extension. Now they're probably looking out for you and doing that and they know you're supposed to do the extension, but you have to make sure that you're not gonna be paying a bill for that. And also just as a general reminder, there's no other extensions. There's no more extensions, like this is it. This is your chance to finally pay and file 2023. You don't get another six month extension or another one. This is it, this is the due date. So if you let the business return linger, this is your chance to get that situated, but I would also use this as an opportunity, if you can, tee up the conversation with your accountant and say, "Hey, along the lines of getting this one done, "I wanna be more proactive next year." And I wanna have a meeting now using this return that we just did together as a basis to plan for 2024 and figure out what I might owe so I can start saving now. There's nothing stopping you from having that conversation. There's nothing stopping you. And now if your accountant resists this conversation that's different, but there's nothing stopping you from expressing that you wanna be more proactive and that you want to take better control of this and not extend next year. And to go even further, you can actually insist. You can tell your accountant, "Hey, "I have no intention of extending. "So I need you to tell me if there's anything else "that you need to file on time. "I don't want to extend." And if we are going to extend, I don't want it done any later than May 31st, for example. I'm gonna provide you everything that we need to within a month of the deadline so that we can file on time. So even if you're super busy, I wanna be somebody that doesn't wait until September. I wanna get this situated before the end of Q2, whatever that looks like for you. Personally, we try to get everybody done by May 31st because we don't have time to be thinking about 2023 in 2024 and we're trying to plan for growth. We're trying to bring our entrepreneurs to hit their goals for the year and we don't want to be distracted by what happened in the past or any type of compliance stuff that's getting in the way. So keep that in mind that the choice is yours. You can absolutely do something like that. There's nothing stopping you and I would actually encourage it. So feel free to share this episode with your accountant if you want to, but let me know if that is working for you. Let me know if you're finding yourself in this position with your accountant and I'm happy to offer some advice. Shoot me a DM @shanekwindstone on Instagram. Let me know you're listening. I would really appreciate it. (upbeat music) Finding the right support that you need for your business can be so confusing when it comes to accounting and tax. Sometimes it seems like you can't find a CPA or a tax pro who actually understands your business or they charge way too much for what you actually need. I've seen this for so many entrepreneurs, they're in a bad relationship with their accountant because they don't know what to look for. It is not your fault. So I created a perfect guide for you that is totally free. It's called the Money Pro Matchmaker and it will teach you what your pro should be doing, questions you can use to interview them to find the right person for you and a guide to evaluate them so you know you're getting what you pay for. Do not get stuck or screwed with the wrong accountant. Download the guide now at moneypromatchmaker.com. (upbeat music) (upbeat music) - Thank you so much for listening. If you enjoyed this episode, please leave a rating and review on your podcast platform. This small action goes a long way for podcasters to get our message heard by more business owners just like you. Be sure to check out the show notes for links to information about our guests and ways to get in touch with me. We'll see you on the next episode. (upbeat music) (upbeat music)
