Tax extensions aren’t scary; they could be your best move
The filing season is here, and while extensions are often seen as a last resort, they can be a smart and strategic tool for both you and your clients. Even if you or your clients regularly extend, it’s critical to remember that extensions aren’t bad—they’re simply a tool to “buy” more time to gather the necessary information and ensure accuracy.
One of the biggest misunderstandings about filing extensions is that taxpayers often think they’ve done something wrong. For many, filing an extension feels like an admission of failure, especially if it’s their first time.
“Extensions are for people who don’t care about taxes.”
Not true! Extensions are used by those who want to make sure they’re filing accurately and taking the time to get it right…and people waiting on K-1s, people who have other life events happening, and people who need more time to fund certain self-employed retirement plan contributions.
This, however, is CRITICAL: an extension gives more time to file, not more time to pay. This is where many get caught off guard. Even with an extension, any taxes owed are still due by the original filing deadline, so clients must plan accordingly to avoid penalties and interest. Be proactive in reminding them to make a payment on time, even if they’re not filing the return just yet.
What you really need to do is stay proactive in your communication with clients. Ensure they understand that filing an extension is a strategic choice rather than a last-minute effort. Help them plan ahead by providing a clear understanding of payment due dates, even if they are filing for an extension. Establishing easy, secure methods for clients to share their tax documents with you can ensure that you are prepared to file when the time comes.
A great follow-up strategy is to remind your clients of the value you provide—especially when it comes to extensions. A gentle reminder to share tax documents as they arrive can help you avoid coming across as pushy while reinforcing your role as a trusted advisor.
Happy Tax Planning!
P.S. We saw the news about LPL and Commonwealth, too. Most of the headlines want to pontificate about where the “right” place to be is; we like to focus on being intentional wherever the right place for YOU is. Regardless of where you currently are, if you’ve got questions about whether it’s the right fit, we’ve partnered with Shelby Nicholl to get our audience a free second opinion on how to think about that fit.
