Here is a parody video about taxes from The Tax Foundation. I found it quite amusing…

Donna Bordeaux is participating in the TaxCoach(TM) SuperTable this week in New Orleans from May 5th – 7th.  The event is a gathering of the top tax professionals across the nation to develop new strategies and systems for providing a proactive plain-English plan for beating the IRS- legally..

Traditional tax planning crunches numbers to illustrate what-if scenarios based on future assumptions.  It gives clients dry numbers, in more detail than they need or want.  But clients don’t want numbers.  Clients want savings. That’s is where the strategies and systems developed at the SuperTable come in.

Many who have never filed an extension are cautious if they have to file one.  They are afraid that “bad things” may happen.  Tax extensions are nothing to be afraid of and may in fact be a good move.  First, extensions for tax returns are needed when there is not enough time or information to file an accurate return by the first due date of the return (for individuals this is April 15, but for corporations, this is March 15).  If there is money due, the due date cannot be changed.  Late payment penalties and interest still begin on the original due date, even though the IRS may not know what the calculation is until the final returns are filed.  You should mail in the estimated balance due with the extension to minimize or eliminate this penalty.

In many cases, it may be necessary to file an extension if you receive K-1′s for partnership or other business interests because that information is not available yet.  If there are questions about the accuracy of information, don’t be afraid of extensions.  It is better to wait and file with real information than to “guesstimate” the information.

There is also one other reason you may want to consider routinely filing an extension each year.  There have been several studies that indicate that you could be reducing audit risk by filing your returns later.  Amir D. Aczel, PhD, a professor of statistics, was once audited and it took him two years to get a no change conclusion.  He was not thrilled with the time this took and the IRS process so he decided to dig in and write a book about the process.  He surveyed several accountants on timing and research about audit risk.  He showed statistically in his book, “How to Beat the IRS at its Own Game,” that filing later reduces audit risk and the changes of being selected.

When asked about how to avoid an audit at a seminar of 500 CPAs, a former District Director of the IRS when asked about how to avoid an audit he said “pay your tax on time and file late. If you file late the service is just glad to get the return and get it processed…”

Is this fool proof?  I don’t know, but can it hurt you?  No, there is no reason that you cannot fully comply with your responsibilities as a tax payer and file by October 15 as required by law.  Do your part, but be smart.

This is an important question to ask yourself when you incur losses.  If the IRS determines that your business is indeed a hobby, they can come back and prevent you from deducting your losses on that business.  The most common example of this that I hear is the guy who loves to fish – let’s call him Joe Taxpayer.   Joe figures that he can become a professional fisherman – taking people out on guided fishing trips on Lake Wylie (usually a lot of his friends) and also competing in fishing tournaments throughout the North Carolina and South Carolina.   Now Joe can deduct the cost of his fishing gear, boat, gas, and all of the other ordinary and necessary items that he uses in his fishing “business.”  Or can he?  Is it really a business or is it a hobby?

In order to get to the root answer, the IRS is going to try to determine whether or not Joe had a specific intent to make a profit with respect to his fishing business.    In order for Joe to deduct his losses on the business he must be able to show that it is being run with the intent of realizing a profit.  Keep in mind that Joe doesn’t actually have to make a profit – as long as he intends to make a profit.

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