By Mark J. Kohler, CPA, JD
Finding your best tax strategy can seem as complex as picking a winning “Bracket” in the office pool. In fact, ESPN experts and their ‘Bracketology’ oftentimes claim that the unconventional wisdom can be the secret to success and saving your precious $5 entry fee into the office pool.
But what about your tax strategy this March and saving thousands on your tax return? What’s your ‘Taxology’ for super savings?
Now let’s be honest. We all know that tax planning takes place in November and December. So instead of me writing an article on a bunch of last minute pseudo tax tips that are simply a feeble attempt at making us feel better for putting off what we should have done last year, let’s call a spade a spade.
You know what I’m talking about…filing an Extension.
Now here’s why I think filing an Extension could be your sleeper ‘Taxology’ strategy to winning on your tax return.
First, by filing an extension, it’s equivalent to taking a ‘Time Out’ right before the final shot of a game. It gives you a chance to dig up all the expenses you can and reevaluate how aggressive you want to be on your tax return.
I’m not suggesting being too aggressive and ‘taking a bad shot’ or risking an audit, but real write-offs you’re probably missing out on. Let’s face it, many CPAs and taxpayers are far too conservative and leave legitimate tax deductions they’re entitled to on the table and cost themselves thousands.
Second, filing an extension is as easy as raising your hands in a game and waiving to the referee. By filing the Extension you buy time until October 15th to send in your final tax return. In order to make it happen, you simply file Form 4868 electronically or mail it in. (However, keep in mind, it’s important you estimate how much you think you might owe in tax and send it in with your Extension.) You can always get a refund later and it will prevent any penalties or interest.
Third, don’t be afraid to file an Extension. Millions of Americans file extensions every year and there is nothing wrong with it. In fact, various statistics over the years have shown that you actually reduce your chances of an audit by extending, simply because the IRS has assigned their audit teams to the already filed returns before the summer is out. Now maybe this is an urban legend, but hey, if there’s any truth to it all…why not?
Finally, let me give you the “why” and get your juices flowing. Just as in a basketball game with seconds to go, let’s pull out a clip board and think of all the different strategies or write-offs we could be missing if we rush into our tax return. Have we maximized our travel, auto, dining, entertainment, office supplies, technology, and telephone? Again, millions of taxpayers understate these expenses related to their businesses, when a little extra bookkeeping and digging could give you some valuable write-offs.
Bottom line, be confident if and when you file an Extension. Take that ‘hail mary’ shot from half-court!! If you have a reasonable argument for taking a deduction and miss, the worst the IRS will do is disallow it. Take the time to dig up those expenses on credit card statements, bank statements, receipts, OR anything you can find and don’t shy away from throwing them on your return.
Good luck with your ‘Bracket’ and your Tax Return!!
Mark J. Kohler is a CPA, Attorney, advising small business owners around the country on tax and legal issues to better live the American Dream. For more information about Mark, his Radio Show, Best Selling Books, Videos and Webinars, please visit www.markjkohler.com. He lives in Southern California with his wife and 4 children trying to find time to surf during tax season.