Five reasons you should not take an extension

Don’t do it! Don’t take a tax extension!

At tax time, it is very tempting to take the easy way out and postpone filing that tax return. Everyone dreads gathering the documentation, summarizing the year’s financial activity and answering the accountant’s questions.

But taking the extension is the wrong move. Here are five reasons why you should bite the bullet and spend the time to finish your tax return on time.

First, you will have a full view of your business activity for the year. As you operate, you know your checkbook balance and your accounts payable total and how much other people owe you. But do you really know your net profit or the value of your depreciated equipment or the full total of your inventory? Your tax return will show you this valuable information.

Second, if you need to borrow money, you’ll need a current tax return to take to your banker. If you need a quick loan or a line of credit so you can take advantage of an unexpected opportunity to take on a big job or add a product line, the bank will require your tax returns for the last three years. Don’t put yourself in the position of having to scramble to finish the return.

Third, if a hurricane (or flood or other disaster) strikes, you may want to apply for an SBA disaster loan. If you do, you’ll need to be current on your tax returns. Here in Southwest Louisiana we’ve avoided Mother Nature’s fury for a while, but we could easily have a rough summer. Ask your friends in many communities across Louisiana about their unexpected difficulties from last spring and summer.

Four, you’ll save money. You will pay your accountant for the paperwork required for an extension. So filing on time is cost efficient for your business – and everyone likes to save money. Even with an extension, you have to pay the estimated taxes, so you can’t avoid that cost even if you delay filing.

Five, you’ll be able to brag about getting your return filed on time. No one enjoys working on taxes. But filing the return is an essential part of conducting your business so set aside some time to get your portion prepared. Focus on how good you’ll feel when it’s over and you can brag that you’re done with it.

l

For over 30 years, the Louisiana Small Business Development Center at McNeese has worked with entrepreneurs and business owners who are looking to start or grow their small business. Visit www.lsbdc.org/msu to learn more about us. For no-cost assistance with your business, call us to schedule an appointment at 337-475-5529.

l

Funded in part through a Cooperative Agreement with the U.S. Small Business Administration and Louisiana Department of Economic Development. All opinions, conclusions or recommendations expressed are those of the author(s) and do not necessarily reflect the views of the SBA.

l

DONNA LITTLE is the director of the Louisiana Small Business Development Center at McNeese State University. Contact her at 475-5945 or dlittle@lsbdc.org.