Avoid tax day stress

When you hear the date April 15th, what immediately comes to mind? For most Americans, it’s “Tax Day” and many people scramble to get their taxes filed. Me, I sit down and enjoy my day and don’t stress about it. It’s not because I got all of my tax documents early, have a tax accountant taking care of it for me or have super easy taxes. In fact, it’s almost the opposite on all accounts. I do, however, file an extension as soon as the tax office begins accepting returns.

Form 4868 is your best friend who is ready for you in January and will make your spring much less stressful. 3 main benefits to filing a tax extension:

• 6-months additional time to file; automatic, no explanation needed
• FREE – no charge, no lengthy form
• You can still file before April 15th

CAUTION: If you owe taxes, the balance is still due on April 15th. If you are expecting a refund, you will need to file to get your money from the IRS.

Having gone through school studying accounting, taken a full tax training class and having a PTIN (meaning I am authorized to prepare returns for the IRS), I knew about the automatic extension. But it wasn’t until I worked for a CPA in Wisconsin where I learned how to properly use the tool. The extension allows you time to reflect on your return, look for opportunities to better plan or to claim missed items. All without the pressure of April 15th when many tax preparers are busy. Do your taxes in June after most of the major filing deadlines are passed and your accountant is looking to fill billable hours for their staff. You might even get a discount for being patient – look at you winning on both ends of the game.

Next, let’s focus on tax management. To properly utilize the extension, you do need to have some idea of your tax bill. All W-2 workers have a tax bill, but generally they’ve paid enough during the year to cover the amounts due. If you receive most of your income in the form of non-payroll earnings, you likely are remitting quarterly payments to the IRS. This complicates tax estimation, but it can still be done with tools available on the IRS website or through your tax accountant.

Before April 15th, you have options to contribute for the prior tax year to a traditional Individual Retirement Account (IRA) which will reduce your tax liability according to your tax bracket. Other than this, there are few options, post 12/31, to adjust your tax liability.

If you do owe taxes and cannot pay the full amount, you still must submit by April 15th for a payment plan which will come with fees and interest, but no punitive penalties. Then, you should start planning for the current tax year so you can stop the cycle. This is where the extension is your ally. Use the time to review your return with a professional and look for options to improve on the current year while filing for the prior year. Do this when your accountant has more time available to consult and review without the pressures of April 15th.

Dan Bergeron is chief accounting officer with Weitzman, a retail real estate and property management company.

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