For most of the nation, the tax deadline was April 15. However, some people need more time to file, so a tax extension is possible.

On April 12, 2024, the IRS estimated that around 19 million taxpayers would file for an automatic extension.

Filing for an income tax extension gives you extra time to prepare your tax return accurately. Still, the months following the extension are crucial for making the most of this additional time. Here’s a guide on effectively handling the period after you’ve filed an income tax extension, ensuring that you remain on track and avoid potential pitfalls.

Step One: Understand the Extension

It’s important to remember that an extension to file is not an extension to pay. For example, an automatic six-month extension to file does not mean you have six additional months to pay your balance.

If you owe taxes, interest may be charged from the return’s original due date, and you could also face penalties. So, if you estimated and paid what you owed when you filed for an extension, you will have avoided potential penalties for late payment.

If not, it’s advisable to calculate and pay any owed taxes as soon as possible to minimize additional charges.

Step Two: Organize Your Documentation

Use the extra time provided by the extension to thoroughly organize and review your financial documents. The goal of an extension is to ensure you file an accurate return.

Collect all necessary records, such as receipts, bank statements, and other relevant documentation, to complete your tax return. Proper organization can prevent errors and ensure that you’re taking advantage of all deductions and credits available to you.

In the case of an audit, you can easily find any relevant figures to support the values on your return.

Step Three: Review Tax Changes

Tax laws can change yearly, so staying informed about any new regulations or changes that could affect your tax return is essential. Understanding these updates may help you maximize your returns or minimize what you owe.

You may have also experienced a life event, like a divorce, marriage, or birth of a child, which can all impact your taxes.

Reviewing the changes with a tax professional who can provide clarity and guidance tailored to your financial situation is also beneficial. For example, preparing a personal tax return will differ from the process when completing a small business or freelancer tax return.

Step Four: Consult With a Tax Professional

Meeting with a tax professional after filing an extension can provide significant benefits.

They can help ensure that your tax return is accurate and that you make the best financial decisions based on your personal or business situation. A tax professional can also help you strategize for the current year and plan better for the next tax season.

Read more: Transformative Financial Practices for Local Businesses

Step Five: Prepare to File Before the Extended Deadline

Do not wait until the last minute to start preparing your tax return.

Begin the process well before the new deadline to ensure you have ample time to address any complex issues or unexpected complications. Early preparation can help you file a thorough and accurate tax return, avoiding rush-induced errors.

You can outsource your accounting services to ensure compliance if you need assistance.

Step Six: Plan for Next Year

Once you’ve navigated the extension period, start planning for the next tax year immediately.

Evaluate what led to the need for an extension and take proactive steps to avoid a similar situation in the future. For example, were you missing critical forms, like a Schedule K-1 or Form 1099? If so, you’ll want to be aware of this next year so that you can collect all necessary documentation well before the tax filing deadline.

Also, regularly update and maintain your financial records throughout the year to ease the stress of the next tax season. Investing in professional bookkeeping support can be highly beneficial for business owners. This support can help you better monitor and control the financial stability of your business, encouraging greater growth and success.

KDK Accountancy Can Help

Navigating post-extension tax season and the intricate tax preparation details requires careful attention and strategic planning.

At KDK Accountancy in Orlando, Florida, we specialize in offering comprehensive tax guidance and financial strategies tailored to your unique needs. Whether you are an individual or a local business, our team is equipped to assist you in maximizing your tax benefits and enhancing your financial health.

You don’t need to navigate the complexities of tax extensions and preparations alone. Contact the experts at KDK Accountancy by calling (407) 759-5363 to schedule a consultation. Take the next step towards managing your taxes more effectively and setting yourself up for financial success in the future.