How Taking Advantage of the Tax Deadline Extension May Benefit You
As a result of the ongoing global pandemic, IRS has elected to extend the 2020 tax submission deadline to May 17, 2021. Following last year’s deadline extension to July 15, it was predicted early on that this would likely be the case.
As the original deadline has recently passed and the extended deadline draws near, taxpayers are once again in a position to ensure that their information is submitted correctly in a timely manner to avoid the possibility of an IRS tax audit.
The financial challenges imposed upon many businesses and individuals in the past year + make the possibility of being faced with an audit more intimidating. Many business owners have undergone financial difficulties and are relying on government funding, such as PPP loans or EIDL funding, to stay afloat. That being said, it has come to light that not all government support was claimed with integrity, resulting in an increased rate of audits and in-depth reviews.
What does the delay in the deadline mean for taxpayers preparing their taxes by the upcoming deadline?
Is it worthwhile to take advantage of the deadline extension? What are the benefits of doing so?
Despite the fact that tax day rolls around at the same time every year, many people still leave their filings until the last minute. Last-minute filing can lead to reporting that is rushed, and potentially incorrect as a result. In the event that your taxes are filed incorrectly, you’re likely an easy target for an IRS audit.
If taking advantage of the extended deadline is the difference between taking the time to review your records to ensure proper filings or potentially filing mistake-riddled taxes, you’re certainly better or taking the extra month to do so.
Even in a normal year, any taxpayer is eligible for an extension for their tax filings. “Filing Form 4868 gives taxpayers until October 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due.” While Form 4868 allows taxpayers an extension to file, they are still responsible for paying their federal income tax by the original required date, in this year’s case, May 17, 2021.
When there is an identified issue with your submitted return, it is advisable to complete an amended return. While best practice is to complete your tax return correctly the first time, amendments are available in the event that you or your CPA recognize an issue that was submitted with your return.
While an amendment might not be ideal to have to prepare and submit, if you know there’s an issue, you’re better off pointing it out before IRS uncovers it. If IRS finds a mistake before you do, you run the risk of an audit.
Taking the additional time to do things such as consulting a CPA or lawyer, reviewing records and reporting, and verifying that your submission is complete and accurate before submitting.
Paycheck Protection Program (PPP) funds from SBA, EIDL loans, Employee Retention Credits, and certain debt relief programs have added a level of complexity and challenge for business taxpayers. If you feel that taking advantage of the deadline extension will make a difference in the integrity and correctness of your return, it is worth your while to take the time granted to review the tax options your company has with your CPA and bookkeepers to ensure correct filings.
If you have been contacted by IRS notifying you of an upcoming audit, reach out to our team of legal professionals for support. We have over 300 cases defending clients in tax audits. For more information, contact Milikowsky Tax Law today.