New Tax Law - Is It In My Best Interest To Consider An Extension?
As tax season is now in full swing, the tax team at Martin Starnes & Associates, CPAs, P.A. (MSA) is preparing for its most ambitious season in years. As one national expert described it, 'It is most likely going to be the most difficult tax season since the 1986 Tax Act, maybe worse.' (See the article in the link below regarding the impact this new law and other recent events have had on the Internal Revenue Service (IRS).) Although MSA employees have spent many hours in training and reading, researching and brainstorming with other practitioners, there is still so much unknown about the new tax law and its benefits and pitfalls. The IRS is still working on regulations to help us understand what the laws mean. We do not want to miss any opportunity for our clients. In order to obtain the best tax advice, it may be worth considering an extension of time to file your return in order to maximize the potential windfall this and the prior tax laws may afford you.
Here is a limited list of taxpayers that may fall into this category:
- Businesses of less than $25 million in sales;
- Businesses who are on the accrual basis or have substantial inventories;
- Any business or individual who has “qualified” income from a business under the new tax law;
- Taxpayers who have multiple brokerage accounts; Broker account amended 1099s;
- K-1s issued at the last minute, which need time for additional planning considerations;
- Unexpected life events such as death or major illness, natural disasters;
- Taxpayers who have sold real estate, business assets, purchased a business, set up a new business, sold or liquidated a business or any other unusual type transactions;
- Businesses that need additional time to fund a company retirement plan (i.e., cash flow timing is an issue); and,
- Businesses filing certain elections; a wide variety of decisions must be made when preparing a return, and an extension gives you the time to make sure that you and your accountant are making the correct decisions.
To take advantage of these benefits, it is going to require additional time to accurately research and complete additional forms that are required for these potential tax savings. An extension allows your tax preparer time to adequately consider all planning angles. In an inevitable rush to get tax returns finished by the April deadline, taxpayers and accountants alike can make mistakes when they are rushing. An extension gives you and your accountant the extra time needed to go over the return and make sure everything is complete and accurate before submitting it.
There are also several schools of thought indicating extensions may have a lesser risk of audit because the percentage of returns selected for audit has already been met by the IRS. There is no solid data that we are aware of that supports this theory; however, the IRS begins to fill its quota fairly soon after April 15th.
Let us know if you wish to take advantage of these opportunities. We will advise you as to your best course of action, but we are diligently doing our best to give you the best advice in the marketplace.