April 15.
Everyone recognizes this date as the deadline for filing and paying income taxes. Around this time the media is full of reports of people rushing to complete and file their forms. You must get it postmarked before the clock strikes midnight on April 15 – or else.
Or else? Not so much. It’s more like if you do not get your taxes done by April 15 push this button and we’ll give you another six months.
As CPAs we know that despite what most people think, the government is pretty forgiving when it comes to April 15. It is as simple as pushing a button to file a tax extension. It is also rather common, particularly with high net worth individuals who may not receive all their documentation by the deadline date. For the individual, as long as you request the extension and pay your estimated taxes, you are in good shape.
What about the CPA? If a client is a little late this year or the required forms are not ready all you have to do is hit the snooze button and Uncle Sam gives you 6 months, right? Nice and easy.
Filing for and receiving extensions are easy, but they can also make the life of the CPA much harder.
- Without automation and a process, you can lose track of your extensions – where they are and what is needed – far too easily. This can result in fire drill situations to prevent your client from being hit with a penalty or even worse, loss of credibility and the client when he calls and asks why he just got slapped with a fine.
- If you have a lot of extensions, they can be disruptive to the normal flow of work within your firm.
How do you solve this problem? The place to start is by minimizing the number of extensions you need to file. If your tax prep process is automated and streamlined, extensions will be kept at a minimum.
Then you must build a process, specific to extensions that allows you to remain on top of them until they are completed and filed. Here’s how to do that.