Myths About Tax Preparation That Could Be Costing You Money
Kenneth HoffmanI've been involved in the tax return preparation process for over 20 years. During those years, I've come across many myths that people believe about tax preparation.
Myth #1: Tax Refunds Are Great News:
You've probably heard some tax preparation firms brag about how many of their customers receive refunds, or the average size of their customers' refunds.
Isn't this great news? I'm not so sure it is.
A refund can seem like great news, especially if it isn't expected, but it usually indicates a lack of tax planning. With proper planning, that refund can be received a whole lot earlier. While most people don't want to owe tax when they file their return, they also don't like to part with their money any earlier than they have to and that is exactly what a refund reflects.
Myth #2: Filing an Extension is Bad:
Many taxpayers are hesitant to file extensions for their business or personal tax returns for fear that there are hidden disadvantages to doing so. This is not true. In fact, extending your tax return can be a great tool in your tax strategy.
Extensions are helpful to avoid having to file amended returns. Sometimes the forms or information you receive from others to complete your tax return may be amended. If you receive an amended form and you've already filed your return, then you must amend your tax return.
Other times, the information you need from others to complete your tax return may be late. Filing an extension provides you with the time to gather this information and accurately report it on your tax return.
Remember: An extension does not mean you are off the hook when it comes to gathering your tax information timely. It is still important to gather all of your tax information timely so the extension can be prepared with the best information available.
Also, an extension does not extend the due date of any taxes due with the return. Any tax liability due with the return is due on the original due date.