In just a few more weeks the tax deadline will be here! Are you ready?
Every year around this time I get a lot of calls from clients who don’t know whether they should hurry and get all their tax documents together or if they should just file for extension and then have the entire summer to work on their tax stuff. If you are wondering whether you should file your taxes now or extend your taxes, here are some important tips to consider.
First, filing an extension allows more time for you and your CPA to review, revise, and strategize before submitting your taxes to the IRS.
It also allows you to feel less pressure knowing you have more time. If your CPA has more time to prepare your tax returns, then they may be able to discover additional tax saving opportunities that may benefit you. Think about it, why would you want your tax return to be worked on at 2 a.m. the week before the deadline when your CPA is operating on very little fuel?
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Here are 6 reasons you should consider filing an extension for your 2013 taxes:
Time is on Your Side:
If you are unorganized with your records or simply unsure of what is tax deductible, then it may be beneficial to take the time to make sure nothing is missed. Organizing your W-2s, 1099s, receipts and rental statements can sometimes take longer than expected so be sure to give yourself a little extra time. For those of you who do fix and flip real estate, you may have lots and lots of expenses to capture so give yourself plenty of time. Giving yourself that extra time will also ensure that your taxes are done correctly and ALL of your tax deductions are captured so that you are getting the maximum refund possible.
Less Chance for Mistakes:
You may have experienced times when your tax documents arrived late, or worse yet, you found out that some tax documents were re-issued after your taxes were already filed! Filing an extension gives you the extra time to make sure everything is accounted for and reduces your chance of needing to go back to make changes with amended returns.
No Penalties for Filing Extensions:
As long as you make the necessary tax payments by the March/April tax due dates, there are no penalties for filing extensions. This is legally allowed by the IRS, so use it to your benefit!
More time means more planning! If you file your taxes later in the year, then you have more insight into what 2014 looks like for you financially. There may be opportunities to shift items between the tax years to get the best tax savings. Some examples of potential strategies include changing accounting methods, making elections to carry-forward or carry-back certain losses, or whether to take advantage of the bonus depreciation. Use the past, present and future to your advantage!
Power of the Roth IRA:
If you made a Roth IRA conversion in 2013, you have until the date you file your 2013 taxes to confirm or undo your Roth conversion. This gives you more time to monitor your investments to see how they performed and determine whether the Roth conversion was a good move. This special freebie from the IRS gives you until the date you file your tax return to change your mind if you wanted to un-do your Roth conversion. Remember, this loophole is only available if you file your taxes by October 15th.
If you plan on making any retirement contributions to accounts like SEP IRAs, 401ks, or SIMPLE IRAs to reduce your taxes, you may have until the date you file your tax returns to make the contributions and still deduct it for the 2013 tax year. This can be extremely powerful because by filing an extension, you may be able to also extend your deadline for making these contributions as well.
So, the Real Question is: Why Not?
The IRS allows you to file extensions to get additional time you need…and we can do it for you! One thing to keep in mind is the extension only extends the time for filing the tax return, not the time to pay. If you think you may owe taxes, then let your tax advisor know so that they can calculate extension taxes for you to help you avoid any penalties.
Your tax extension can be filed easily and can give you the extra time needed to make sure that you file the best return possible. This year, make a promise to your money to do all that you can to keep more of it and give less to the IRS. Contact your tax advisor today!
What are your thoughts on filing for an extension? Let’s discuss..