This video addresses common anxieties surrounding tax extensions, particularly the fear of IRS repercussions. The hosts, Mark Kohler and Matt Soron, aim to demystify the process, highlight the benefits of filing an extension, and alleviate concerns about penalties.
Filing a tax extension is advantageous: It provides more time for accurate preparation, allowing for thorough identification of deductions and write-offs, potentially leading to greater tax savings. It also reduces the likelihood of an audit by delaying submission until after the IRS's initial audit selection process.
Penalties are primarily for late payment, not late filing: While penalties exist for late tax payments, there's no penalty for filing an extension. A six-month extension (until October 15th) is granted for personal returns. Estimated taxes should be paid by the April 15th deadline to avoid penalties and interest.
Tax extension allows for better tax planning: Filing an extension gives individuals more time to assess their tax situation, potentially prompting discussions with a tax advisor for better planning and strategy adjustments. This is especially helpful for those needing to switch tax advisors. The summer is presented as an ideal time to find a new tax advisor as they are less busy.
Specific deadlines remain even with an extension: Certain tax obligations, like contributions to Roth IRAs, HSAs, and Coverdell Education Savings Accounts, have April 15th deadlines that are not extended. Similarly, setting up a solo 401k for sole proprietorships must be done by April 15th. The deadline for LLCs and S-Corps is March 15th, with specific penalties for late filings in these cases.
Don't panic about tax deadlines: The hosts emphasize reducing stress and encouraging viewers to file for an extension if needed. They address the misconception that the IRS will disappear, reassuring viewers about the continuation of tax obligations regardless.
