Tax preparation and planning are essential elements of any comprehensive financial plan. It is crucial for you to be aware of tax deadlines and how filing an extension can help you grow towards your goals. Use this guide to tax deadlines and filing extensions by your Oakwell Private Wealth Management team as your resource for 2022 and beyond.
When is the 2022 deadline to file taxes?
You have until Monday, April 18, 2022, to file and pay your personal taxes. Taxpayers in Maine or Massachusetts have until April 19, 2022. If you file an extension by the date that applies to you, you will have until Monday, October 17, 2022, to file and pay your personal taxes.
This date is later than the usual date of April 15 because of the Emancipation Day holiday in the District of Columbia. By law, holidays in D.C. impact tax deadlines for everyone in the same way federal holidays do. Taxpayers in Maine or Massachusetts are further impacted because these states recognize the Patriots’ Day holiday.
If you are filing tax returns for partnerships and S corporations, the deadline to file is one month earlier, on March 15, 2022. Similarly, if you file an extension by this date, your extended deadline will be September 15, 2022.
What are the benefits of filing an extension?
There are two main benefits to filing an extension for your taxes. Firstly, you can use the extra time to ensure you have all the documents you need to file your taxes correctly. Secondly, you can decrease your chances of being audited.
Giving yourself time to acquire all the documents you need and file your taxes correctly is essential. Filing your taxes correctly is much more important than filing quickly. Also, if you are invested in a partnership or S corporation, the related Schedule K-1 tax form often does not get filed until September, making it impossible to file your personal tax returns until afterward.
Filing correctly is also crucial in case you get audited by the IRS. Being audited does not always mean there is a problem, but if any problems are uncovered, the IRS may apply an additional penalty on top of any taxes you owe. The auditing process can take three to six months, during which you will need to spend valuable time providing requested documentation and responding promptly to all communications instead of focusing on your life and work.
Filing your taxes correctly can make a potential auditing process go more quickly and smoothly, but, according to advice from professional CPA Thomas Panagiotou of LPF, PLLC, filing an extension can help reduce the chances of getting audited in the first place. While there is no guarantee you will not get chosen for an audit, the IRS tends to start by auditing returns filed before the first deadline.
What should I do if I need or want to file an extension?
If you plan to file an extension for your personal tax forms, you need to submit an extension form and file an estimate of your 2021 taxes by the 2022 deadline. This step will help you avoid possible penalties for paying late taxes. You must also pay all retirement contributions by the deadline, as this deadline cannot be extended.
If you are working with a tax professional to handle your taxes, ensure you get in touch with them and provide as much information as possible, such as:
- How much you expect to earn in 2021 earnings
- Any new sources of income in 2021
- Any new deductions
Using this information, your CPA can estimate your taxes, subtract the amount you have already paid, file an extension, and estimate what you need to pay. Your tax filing deadline is also the deadline for paying your 2022 Q1 estimated tax payment, so rolling these payments together simplifies your finances and provides a buffer in case your 2021 estimate is not perfect.
Are there any consequences for filing an extension?
There is a common misconception that filing an extension is problematic, indicates an issue, or raises a red flag with the IRS. However, historically, there have not been any punitive measures associated with filing an extension as long as you apply and pay your estimated taxes by the appropriate deadline.
Many people need to file an extension for various reasons, including waiting for necessary forms and wanting to file correctly, not quickly. If that means you need extra time to file your taxes, filing an extension is encouraged.
Your Oakwell team can coordinate with your CPA or our own trusted partners to collect any necessary information to calculate estimated payments, ensure you get your retirement contributions in, and file your extension and taxes correctly. Let us help you grow towards your goals by ensuring that your tax preparation and planning fit into your overall financial plan.