RTS #40 There’s a tax deadline next week

Don’t panic, depending on who you serve the March 15th deadline may not be a big deal. Corporate tax returns (including S-corps and Partnerships) or an extension filing are due March 15th, so your business owner clients (and maybe you) need to make sure there is a plan for getting that addressed in the next week if it’s not already done. This is also a good time to remember that extensions can be a great tool and are not inherently a bad thing. I personally regularly file for personal and business extensions, in part so I can stay focused on serving my clients this time of year.

That last point may feel obvious but especially the first time a taxpayer files an extension it can feel to them like they’ve done something terribly wrong, unless you proactively set a different expectation. It’s also critical to make sure that clients understand that an extension gives them more time to file, NOT more time to pay. Taxes are still due by the filing deadline, whether they file a full return at that time or not. For many business owners, this distinction is specific to April 15th and not March 15th because of the high number of passthrough entities at the small business level.

If there are taxes due with the taxpayers personal return and payment is not made by April 15th the IRS will start charging underpayment penalties. It’s not enough to have met the safe harbor provisions throughout the tax year; that only saves you from underpayment penalties through the filing deadline. Once April 15th rolls around, the IRS expects every dollar you owe. For clients with a state income tax filing requirement, it’s important to understand their state’s rules around filing extensions and making payments. Many states (but not all) don’t require a separate extension if the federal return was extended, and each state makes their own rules on whether the taxes are due April 15th or at the time of filing. When states are involved, it’s worth double-checking.

At this point the first round of 1099s should have all been released so make sure you are doing your part to help clients get that information. Just because a client routinely extends their filing does not mean you should hold off on sharing tax information. Those 1099s could impact their calculation of how much tax is due when the extension is filed.

What can you do about it?

Be part of the conversation on your client’s tax filing. You don’t need to be the one doing it but taxes are a big piece of their financial life so you should set the expectation that you want to be part of the process. Those open lines of communication should include your clients sharing a copy of their tax return with you, which means you need to give them an easy way to do just that.

A great way to follow up with clients without just being a nag is to remind them of the easy ways you have set up for them to securely provide you with a copy of their tax return once it’s complete. A reminder about the value you provide is way better than a “Hey, are you done yet?”

Happy Tax Planning!

About The Newsletter

The tax code is 80,000+ pages and Google has 875,000,000 results when you search “Tax Planning”, so each week we are going to help you wade through all of that noise and get to the Relevant Tax Stuff.