After last week’s breather after the end of tax season (and I still say I deserved it), there are a few lingering ideas I want to mention before maybe leaving taxes behind for more than a week at a time over the coming months.

First, for those who have finished their tax work for the year, one may start to wonder what to do with all the paperwork you gathered to file your return. Well for now, keep it. If supporting paperwork was necessary for your return, right down to every receipt, it is best to bundle everything together just in case you end up needing it. I wrote a few times over tax season about the chances of an audit, so I do not want to go back into it here, but let us just go with the idea that there is a non-zero chance you could face one. Even if you filed the most accurate and legal of tax returns then, it is best then to keep all of those papers and forms together.

But for how long?

I don’t want to go into the minutiae of recordkeeping and timeframes here, but if you are interested in knowing more about it, read this article on Forbes.com, where author Kelly Phillips Erb gives more detail in concise and understandable language. Essentially, though, that statute of limitations on a tax return that is correct and timely is three years after the due date. Anything clearly fraudulent, or simply not filing a return, comes with no time constraint, though, and you can always be called to task on those. Then there are some lesser crimes/mistakes that can extend the statute of limitations to six years.

So it is really up to you how long you want to hold onto your paperwork, but three years should clearly be the minimum. Holding on to the end of that six-year limit is probably an even better idea, though, and just how much space are those folders in the cabinet taking up anyway?

And at least you filed a return. The IRS released a notice on April 13 that nearly 40 million taxpayers were expected to still file returns or extensions before the deadline of the 18^th. Now I clearly was not unaware of the tendency some taxpayers have to finish things up at the last minute (and how this can involve a barrage of questions thrown at a tax professional), but that number was much higher than I would have estimated.

Now of course part of this number is due to the fact that no one really LIKES to handle their tax returns. Those of us who get some enjoyment out of all that paperwork are clearly the outliers. I also have to think, however, that a great deal of this isn’t the sole realm of the tax return, but the fact that many people only worry about their finances when situations force it, and those are rarely happy occurrences.

One of the best parts of what I do is when I see people, whether they are simply individuals or business owners, have the weight of handling their finances lifted from their shoulders. For a lot of times I find that people don’t want to ignore their finances, they often do not even know where to start to make them make sense. When one finds that way out, it can provide a lift that reinvigorates passions that were held down by worries and uncertainty.

So if you find yourself in a situation like that and it was highlighted during this tax season, you should take action now to make sure it doesn’t happen again next year. And if this is something we could help you with, for we can’t wait to move into that next part of that cycle of the financial year. 

Did you hear that? It was the giant sight of relief from those of us in the accounting profession as the tax filing deadline finally passed. Sure, that extended April 18^th deadline gave many taxpayers some extra time to file their return, but it meant tax preparers were holding our breath for a little longer than usual.

We sometimes feel like we are alone on an island during the tax season, for even when surrounded by others, our lives are run with such single-minded focus that everything on the periphery tends to fade a little bit. There was even an article on AccountingToday.com about how tax preparers relax during the season, and boy, some of that was just getting up to walk around for five minutes.

With all that being said, I hope you will allow me a little diversion with this week’s spiel, and a few less words than usual.

So to the first part of that, here is the Whose Line Is It Anyway cast bringing you Songs of Accounting – https://www.youtube.com/watch?v=XSranciXOvs.

Yeah, even professional comedians can’t help but call us boring.

Maybe in here, though, is a little bit of a lesson. Not everyone works in an occupation where government-declared deadlines forces a busy season upon you, but everyone has days that feel overwhelming. Everyone has moments when there is too much to do, not enough time to do it, and finding a way out seems impossible.

Those are the days, however, when it can be most important to take a break. Even if it is just a five-minute walk outside, or a couple laps around the office, doing something different for a few moments can be crucial to one’s sanity. And if you are sane, your work output tends to be of higher quality.

Beyond that, having a laugh (and being able to laugh at yourself) helps ease pain and stress as a general rule. And when even a boring accountant says that, it must be true.

As we hurtle toward the end of tax season, there are times when I find it difficult to still form coherent thoughts. Here’s to hoping that the rest of this makes sense then, and maybe that it even contains important information for some of you. I believe that last part is possible because it is about something that we have seen more this tax season than ever before - the growth of the sharing economy.

So yes, this includes you if you have given an Uber or Lyft ride. It probably also includes you if you used any property you owned as an Airbnb. What all these things come back to is the essential rule that if you earn money, the IRS very likely wants to know about it.

This even includes income for which you did not receive a Form 1099 or Form W2. In fact, it even includes transactions where you were paid in cash. Many believe that if there is no paper trail, there is no way the IRS could know about it, and I cannot claim that this is exactly untrue. Just remember, though, that if you are not claiming such income on a tax return, but someone else is mentioning it elsewhere, say as a deduction, that is the beginning of a paper trail of which you were unaware.

Even if you rent out some space in your home for a few weeks, but lived in it the rest of the year, there could be tax implications. Granted, these aren’t the same as having real estate that are purely investment properties that you rent out, but there still rules surrounding it.

What this sharing economy seems to add up to more than anything – at least from our view here – is many more people earning income in new ways that alters their tax picture, and often in ways they do not understand. This is certainly a situation where consulting a professional may be necessary to gain the proper peace of mind that you have submitted an accurate tax return.

This belief isn’t quite as self-serving as it may seem, though, for there are benefits for those who seek that type of assistance. You see, for just as there are different rules to be aware of when you make new types of income, there are also most likely new deductions involved. You don’t want to avoid reporting income that the IRS will want to tax you on, but you also don’t want to be paying more than your fair and legal share.

Finally, when it comes to paying taxes on this money, be aware that the IRS wants to be sure that you are paying as you go during the year. So if you are leveraging this new economy to the point where you’re making enough money to need to pay a significant amount of income tax, the IRS will expect quarterly estimated tax payments to ensure you are living up to those obligations.

I know that this can feel like there is a lot involved for something that many people run as a simple sideline business. To a certain extent this is true, but it is also an area where you want to be sure that you have the correct answers. We are confident that we can give them to you, and would be happy to discuss the situation if you have any concerns surrounding it. 

We have finally made it to April.  This may not mean much to you beyond the hopeful emergence of spring, but for those of us who work with taxes, it is when we finally (at least almost) start to crest the mountain that is tax filing season and get on the downhill side.

Granted, we still have a lot of work to do to get there, but the endpoint is in sight. This means that if you are one of the sizeable portion of the population that has been putting off filing your taxes, you better act quick if you still want an appointment before this year’s April 18 deadline.

As happens every year, we always see a rush over these final days and it is impossible for everyone who puts things off to these late dates to get their taxes finished in time. Fortunately for them, the IRS does have options to get an extension on your filing time. I wanted to take the time this week to discuss some of what that means, before it is too late.

The biggest thing to remember is that getting an extension to file does not mean you receive an extension to pay your taxes. Any taxes or penalties you may incur on an outstanding tax bill can begin to accrue on April 18 and this is regardless of whether you have received an extension or not.

Do not take this to mean that it could be better to not file your taxes, however. Yes, you may not want to know the answers that exist at the end of your tax return, but not filing it will only lead to more penalties. If your finances are not where you need them to be, you should do what you can to stop the situation from snowballing instead of avoiding it. You could try to ignore it after all, but chances are REALLY good that the IRS will not.

So if you need to file for an extension for any reason, you will also want to do what you can to make the best guess as to what your final tax bill will be and pay that on the April 18^th due date. Remember, we are talking about a bill that can be subject to interest charges, so the more you attack it before the interest starts to build, the less you are going to pay in the long run.

This means that even if you are in a position where you cannot currently pay all of the tax owed, paying as much as you can will only be a benefit in the long run. It will also be worth looking into other methods to fund paying the bill, where the charges associated with those could work out to being less than paying through the IRS. And there are also payment plans that can be set up through the IRS itself to help you eventually meet your obligations.

Overall, we understand the need for some taxpayers to get extensions on their tax returns, but when doing so it is important to have a plan for when the actual filing will occur and how to pay any bill that will exist. Again, there are options on how to best handle all of this, but the chances to figure this out before the clock runs out are dwindling.