Learning From March Madness: Why Filing an Extension Could Be Your Sleeper Tax Strategy Business owners should take a cue from 'bracketologists' and embrace unconventional wisdom when it comes to filing an extension this season.
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It's that time of year, and even the casual sports fan gets excited about the annual office pool and NCAA Tournament. The trick is finding the strategy that works best for you in choosing that winning team- it seems everybody has a tip or some advice.
The "safe' bets aren't always so safe either, which is why ESPN experts explaining the science behind their March Madness brackets often claim that "unconventional wisdom' can be the secret to success – this is where "Bracketology' starts to take form.
This couldn't be truer when it comes to tax strategies and more specifically filing your tax return. Regrettably, I think many small business owners will also rush to file their tax returns in the next few 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.
Are you going to save thousands on your tax return? What is your "Taxology' for super savings at this point? Shouldn't it be taking your time scouring any and all records, bank statements, credit card bills or receipts for extra write-offs you may have missed capturing last year?
Let's be honest. We all know that tax planning takes place in November and December. So lets working capturing what we can by focusing on our record keeping and not rushing to file. You know what I'm talking about: filing an extension. It could be your sleeper "Taxology' strategy.
1. Filing an extension is the equivalent of 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. Take this time while under an extension to research some of the tax strategies your CPA/Accountant has shot down in the past and get a second opinion. In fact, review articles and videos here on Entrepreneur.com that could give you additional ideas you never considered.
2. Filing an extension is as easy as raising your hands in a game and waving 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. Let me give you the "why" and get your juices flowing.
3. Consider all the 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.
