Even an extension isn’t a free lunch. As Trish McIntire explains below, extensions extend the filing deadline, not the payment deadline, so you need to have at least an idea of your current tax situation even to extend.
Start with your 2012 return. Make sure you have all of the items you reported on that return — W-2s, K-1s, 1099s. Then think through what might have changed since last year. New kid? New spouse? Lose an old spouse? Won the lottery?
Then pencil out a return, or hurry down to your preparer. If your preparer tells you to extend, don’t fight it. An extended return is not a “red flag” to the IRS. And when figuring out how much to pay with your Form 4868, round up. This time of year, it seems most surprises are the bad kind, so assume the worst.
If you want to know what does work as a red flag for the IRS, the Tax Court yesterday had a good example:
Petitioner’s 2010 Form 1040, U.S. Individual Income Tax Return, was prepared by H and R Block. On Schedule C, Profit or Loss From Business, petitioner reported gross income of $1,274, office expense of $142, and car and truck expenses of $17,978, for a net loss of $16,846.
A schedule C with just a little income and a big loss caused mostly by car and truck expenses probably goes straight to the “audit me” bin, because the IRS knows that many taxpayers are like this one:
Although petitioner provided his 2009-10 mileage log, he nevertheless failed to provide any corroborating receipts or other records that substantiated the statements made in the log. Petitioner’s mileage log did not address the business purpose of each trip. Guessing as to where he may have gone in 2010, petitioner added the places of business travel to his log in 2012. The log was thus not contemporaneous, and the reconstruction was not reliable.
If you want to take car deductions, you need to keep track of them as you go, in a log, a calendar, or a smart-phone app. Otherwise you, like the taxpayer in this case, won’t stand much of a chance against the IRS.
William Perez, Retroactive Charitable Donations for Typhoon Haiyan Relief:
Taxpayers can take a deduction on their 2013 tax return for cash donations made between March 26, 2014, and April 14, 2014, to charities providing disaster relief to areas impacted by Typhoon Haiyan.
Normally, charitable donations can be deducted only if the donation is made by the end of the year. But the recently enacted Philippines Charitable Giving Assistance Act (HR 3771) gives taxpayers the option of deducting donations for Typhoon Haiyan relief on their 2013 tax returns.
William explains what you need to do to claim the retroactive deduction.
TaxGrrrl, Taxes From A To Z (2014): Q Is For QDRO
So what if you can’t get your return done in time to file by then? You can file an extension. It can be done electronically or by filing a paper Form 4868 by April 15th. And it does have to be postmarked or electronically filed by April 15th. After that time, the extension won’t help you.
Remember, an extended return does not attract IRS attention; a late or erroneous return does.
Ways and Means Chairman Dave Camp Won’t Seek Reelection (Accounting Today). That can’t be a good sign for his misconceived tax reform plan.
Jeremy Scott, Fair Shot for Everyone’ Contains Details for No One (Tax Analysts Blog):
Setting a new low for lack of detail and specificity, Senate Democrats unveiled their “Fair Shot for Everyone” agenda last week. Only loosely a set of real proposals, the agenda is merely a series of talking points designed to distract voters from President Obama’s lagging approval numbers and the continuing unpopularity of the Affordable Care Act.
Not a glowing review.
Howard Gleckman, Should Tax Reform Be Sold on Values Instead of Economics?
Paul Brennan, In Iowa, your taxes help corporations not pay theirs (Iowa Watchdog.org):
Of course, $950,000 isn’t much more than chicken feed to a company like Tyson, which posted $583 million in profits in 2013. It also doesn’t compare with the tens of millions of tax dollars the state paid out to big companies through the Research Activities Credit last year.
But it is probably enough to leave tax payers feel well and truly plucked.
Nobody notices a few missing feathers.
Des Moines Register, Branstad will sign Iowa Speedway tax break in Newton ceremony Wednesday. Because NASCAR has better lobbyists than you do.
Tax Justice Blog, State News Quick Hits: State Lawmakers Not Getting the Message
Alan Cole, Bitcoin’s IRS Troubles (Tax Policy Blog:
The price of the virtual currency Bitcoin has fallen to about $461 from a closing price of $586 last Monday. This decline of about 21% came in the wake of an IRS ruling that net gains from Bitcoin transactions will be taxed as capital gains.
Nobody wants a Schedule D item for every purchase.
TaxProf, The IRS Scandal, Day 328. April Fools edition, unfortunately.
News from the Profession: The Forgotten Spouses of Public Accounting (Going Concern). I’m sure mine is around here somewhere.