Top 5 Things to Know About Tax Extensions as a Content Creator
If you’re running late on your taxes, you might be stressed. Will you rush to fit them in and maybe fill out your tax return wrong, forgetting deductions and paying more than you need to? Or will you just put it off until you have more time to do it right, and take whatever penalties come your way?
The good news is that you have another option! You can file for an extension so you get a reprieve without risking all the problems that come if you don’t file at all.
But there are some common questions and misconceptions about tax extensions. We’re here to clear up tax extensions as a content creator, so you can decide whether an extension is the right choice for you.
A Tax Extension Buys You More Time to File, Not to Pay
A tax extension gives you extra time to file, but it doesn’t give you extra time to pay. This can be rough for content creators who haven’t been setting money aside during the year. If you don’t pay at least a reasonable estimate of your tax bill by the deadline, you could face penalties and interest on the unpaid amount. To avoid extra fees, try to pay as much as you can when you file for the extension.
Filing for an Extension Is Easy (and Free!)
Requesting a tax extension is a simple process! The IRS allows you to file Form 4868 (or Form 7004, if you’re filing your S-corp taxes) online or by mail, and most tax software platforms provide an easy way to submit it electronically.
The best part? It’s free! There are no fees for filing an extension, so if you need more time to organize your finances, there’s no harm in taking advantage of it.
It Can Help You Avoid Late Filing Penalties
Income as a content creator or influencer comes in untaxed, so you’re likely looking at a pretty hefty tax bill that you can’t afford to pay before the deadline. It’s okay if you can’t pay the full amount by the deadline, though.
Filing an extension can help you avoid the hefty failure-to-file penalty, which is 5% of your unpaid taxes per month, up to 25%. This penalty is significantly higher than the failure-to-pay penalty, which is just 0.5% per month. (We don’t recommend that you rack up penalties, of course, but the less you have to pay in penalties, the better.)
By filing for an extension, you dodge that huge 5% penalty and buy yourself more time to file accurately. It’s a much better alternative than ignoring the deadline altogether.
An Extension Could Give You More Time to Find Deductions
As a content creator, there are a lot of deductible business expenses that range from cameras and software to more niche-specific spending like video games, makeup, and exercise equipment. Filing an extension can give you extra time to organize and maximize your deductions, which will lower your taxable income.
For example, if you’re missing receipts or need more time to calculate your expenses, an extension helps you file a more accurate return, reducing your chances of paying too much in taxes.
It definitely helps to consult an accountant who understands your line of work. Too many content creators are afraid to claim legitimate deductions because they’ve gotten bad advice from their local accountant. An accountant who knows the creator economy will help you find every deduction possible so you can lower your already huge tax bill.
Extensions Are Common
If you’ve never filed for an extension, you may think it’s something no one ever does. But filing for an extension is a smart move if you need more time, and plenty of people do it for both personal and business taxes each year. Creators and influencers don’t need to feel shame around needing extra time, the IRS is actually very understanding about this!
When you file an extension, you get an extra six months to file, so your tax return will be due in October (or in September, if you’re getting an extension on your S-corp taxes). But don’t waste that extra time. Gather your documents, make sure everything is accurate, and work with a tax professional if you need to. A rushed return in October isn’t much better than a rushed return in April.
Conclusion
Tax extensions as a content creator can be a useful tool for those who need a little breathing room, but they’re not a free pass to ignore your tax responsibilities. By staying informed and planning ahead, you can take advantage of the extension without running into trouble.
Need that professional help we mentioned earlier? Book a call with us to see how we can remove your tax and bookkeeping headaches. We work only with content creators and influencers, so we get the nuances of your business and we understand the deductions, income sources, and accounting issues that other businesses never face.
