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There’s about one month until the Oct. 17 tax deadline extension, and experts say filers need to organize, especially for more complicated returns.
An estimated all-time high of 19 million American taxpayers filed an extension for his or her 2021 returns, in line with the IRS.
Kevin Brady, an authorized financial planner and vice chairman of Wealthspire Advisors in Recent York, said tax professionals have faced many challenges, including deadline changes and recent Covid-related laws.
“Whenever you mix those facts with the understaffing in tax prep and accounting firms and usual tax code complexity, filing for an extension has grow to be more of a necessity,” he said.
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For instance, the Paycheck Protection Program and worker retention credit, enacted for businesses through the pandemic, have added a “significant amount of complexity and uncertainty,” said Rob Baner, a CPA and tax advisor at The Planning Center in Moline, Illinois.
Despite these challenges, taxpayers are quickly approaching the deadline for 2021.
“One of the best advice we can provide is to file the return as soon as possible,” said CFP Diahann Lassus, managing principal at Peapack Private Wealth Management in Recent Windfall, Recent Jersey, who can also be a member of CNBC’s Financial Advisor Council.
Tips on how to get organized before the Oct. 17 deadline
Experts say that with only about 4 weeks left until the deadline it is important to get organized, communicate along with your tax preparer and supply information as soon as possible.
“Don’t procrastinate,” Baner said, noting that some tax documents may take more time to process. He suggested keeping a folder for all paperwork.
For instance, tax professionals are wrestling with recent Schedule K-2 and K-3 forms for international taxes, which can not come until Sept. 15 or Sept. 30. These forms go along with Schedule K-1 forms for partnerships, S-corporations, trusts and estates.
Electronic filing is probably the most efficient.
Managing principal at Peapack Private Wealth Management
When you’re expecting a refund, it’s possible you’ll receive it faster by e-filing and selecting direct deposit, in line with the IRS, with most error-free returns processed in fewer than 21 days.
“Electronic filing is probably the most efficient,” Lassus said.
Suggestions for the Oct. 17 tax extension deadline
1. Don’t procrastinate.
2. Communicate early and infrequently.
3. File electronically.
4. Pay your tax balance.
5. Reconcile Covid relief.
Nonetheless, if you happen to didn’t pay your balance by the April 18 deadline, you may owe interest and a late-payment penalty, which varies by variety of return and the length of time past the deadline, Baner explained.
Rates of interest for underpayments jump to six% from 5% on Oct. 1 and compound day by day, in line with the IRS. And if you happen to miss the tax deadline extension, it’s possible you’ll owe a late-filing penalty.
“The one excellent news here is that there is no such thing as a penalty for failure-to-file if you happen to are due a refund,” but you need to file inside three years to assert it, Lassus said.
With the IRS still digging out from a backlog of unprocessed returns, it is important to file accurately to avoid unnecessary processing delays.
Before filing, you will need to double-check Covid relief, corresponding to stimulus and advance child tax credit payments, Baner suggested, urging filers to match IRS letters with bank statements.