The ‘safe’ bets aren’t always so safe. Which is why ESPN experts explaining the science behind their March Madness brackets often claim that ‘unconventional wisdom’ can be the secret to success -- and to saving your precious $5 entry fee in the office pool.
The ‘Bracketologists’ have a point. After all, how many of you picked Dayton, Tennessee or Stanford to be in your sweet sixteen? Not likely when Duke or Wichita State were the ‘safe’ bets, right?
Regrettably, I think many small business owners will also rush to file their tax returns in the next 3 weeks because it’s the conventional wisdom to file by April 15. In reality, acting hastily to meet this deadline could force them to overlook critical deductions.
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.
Are you going to save thousands on your tax return? What is your ‘Taxology’ for super savings at this point? Shouldn’t it be scouring any and all records, bank statements, credit card bills or receipts for extra write-offs you may have missed capturing last year?
You know what I’m talking about: filing an extension. It could be your sleeper ‘Taxology’ strategy.
First, filing an extension is the equivalent to taking a ‘Time Out’ right before a game’s final shot. 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 giving yourself time to consider real write-offs on which you’re probably missing out. 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. 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.
You shouldn’t let filing an extension scare you. 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 since many tax professionals say the IRS will have assigned its audit teams to the already-filed returns before the summer is out.
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 clipboard 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 costs? 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 worse 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. Let that be your winning strategy on this year’s tax return.