Tax Extension Filing Tips

Tax and Financial News for April

Tax Extension Filing Tips

It’s not long before tax returns for individuals will be due for 2016. This year April 18 is the deadline for filing. For a lot of people, filing on time is not only impractical but outright impossible. Many taxpayers will still be waiting on information before they can file. For example, it is common for S-Corporations as well as partnerships to file extensions because their Schedule K-1 won’t be ready in time. For others, investments can cause the hold-up. Whether it is a broker letting you know that a corrected 1099B is coming, you are an active trader or you have an investment in a hedge fund, there is a good chance you will need to file an extension.

The best way to look at this is as an opportunity. There is no rush to complete your tax return by April 18. Instead, look at it as a chance to use the additional time to your advantage. But first, a few basic guidelines.

How Extensions Work

You can request an automatic extension that gives you an additional six months to file your Form 1040, with a new deadline of Oct. 16. The form to file an extension is Form 4868 and is only one page, so it’s easy to complete. However, what is complicated is that an extension only gives you more time before you need to file, not more time before your payment is due. This means you will have to complete your return with all the information you have, make estimates of what you are missing and make a payment that is close to what you owe in order to avoid interest and penalties.

Always remember to file an automatic extension even if you are unable to pay the bill in full, since the penalty for filing late is substantially more than that for paying late.

Pay Your First Quarter Estimated Taxes While You Are At It

If you are making estimated payments because any withholding doesn’t cover your tax bill, it is best to roll this payment into your extension payment and just overpay with your tax extension for 2016.

No matter the amount you may be off by from the actual amount owed when you finally file, these additional funds can do one of the following: (1) act as a cushion on 2016 if you underestimated your taxes; (2) provide a credit for overpayment toward 2017; (3) give you a refund if no 2017 estimated taxes are due.

Now that you’ve filed and paid in with your extension, let’s look at some potential benefits.

Section 475 MTM elections

If you qualify for active trader tax status, you should consider filing a Section 475 MTM election. This election allows for ordinary gain or loss treatment of your trading activity instead of capital gain treatment for long-term gains and losses. Ordinary losses generate tax benefits faster than capital loss carryovers, so this is especially valuable if you have a net loss overall coming from capital losses and ordinary gains.

Increase Retirement Planning Options

Filing an extension also pushes back the deadline for contributing to a qualified retirement plan such as a Solo 401(k), SEP IRA or defined benefit plan.

Become Friends with Your Accountant

If you know you will need to extend, do not neglect to tell your accountant and get them all the information you can as soon as you can. Letting your accountant know you will need to delay allows them to plan accordingly. The more advance notice they have, the better job they can do in estimating your extension and first quarter payments and other planning ideas.


Filing an extension is not necessarily a bad thing – and it’s unavoidable in many cases. Just follow the rules and make sure to check on any state specific deadlines or rules for your situation.




General Business News for April

How to Create a Succinct, Effective Business Plan

Whether a first-time entrepreneur is opening a new business or a serial entrepreneur is working on his next venture, a business plan is often necessary. While creating a business plan is extensive and consists of many parts, it can help a firm structure itself better and showcase its mission and value to outsiders. With the potential such a plan offers, how can an entrepreneur develop a succinct, yet effective business plan?

Executive Summary Considerations

The primary mission of an Executive Summary is to provide a snapshot of the entire company, offering the reader, notably potential investors, an overview of a company’s value. It often explains what the business does, how it solves an existing problem and how the company will accomplish it. It also details the financial status of the business, including the amount of financing desired and the potential rate and timeline for investor return. Generally speaking, the length of an Executive Summary should not exceed one or two pages.

In addition, it’s important emphasize specific content within the Executive Summary based on the stage of the business. For example, newer companies should focus on the experience each founder brings to the organization. It also should feature a market analysis for the particular industry; how the venture addresses a particular industry need; and how the business’ products or services will accomplish meeting that need.

For more established business entities, the Executive Summary can take a different form. It should begin with an overview of the business’ function, and include formation dates, founder names and titles, the current number of workers, and addresses for the company’s primary and satellite offices. Additional elements may include a discussion of recent growth, such as increasing profit margins or market share analysis. Provide a quick summary of product or service details, including any recent developments or innovations to existing products or services, with a summation of plans going forward.

Addressing Operations

Another important part of a business plan is to inform the reader, most often a potential investor, as to how capital will be used.

This section can be quite expansive because it covers how the individual product or service is produced from step A to step Z. Whether it’s finding raw materials from a supplier, locating an office or factory to house equipment and employees, hiring employees or managing IT infrastructure, this part should be clearly detailed for external readers.  

While it’s possible to document every step or process, a good guide is to look at the particular industry and cover what’s relevant to that industry. An example in the metal fabrication industry is to focus on inventory management and how to deal with commodity price fluctuations. While discussing major points such as labor is important, be sure to strike a balance to help answer questions readers may have that are specific to your industry.

Each business plan is different for each business owner and industry. Making the most of a business plan benefits owners by increasing their chance of survival while at the same time communicating their mission in order to attract the right investors.




Tip of the Month for April

What the Fed’s Rate Hike Means for Small Businesses

The Federal Reserve’s mid-March hike to interest rates – its second increase to base interest rates in three months – was a strong confirmation that the economy is doing well. The Fed had kept interest rates at historically low levels in order to support a recovery after the recent recession (commonly referred to as the Great Recession), which occurred roughly between December 2007 and February 2010. The Fed’s move means that businesses will pay higher interest rates when they take out a loan. Some major banks have already indicated that the current quarter-point boost will translate into a prime lending rate of 4 percent (up from 3.75 percent). If you are wondering how this increase is positive news for small business owners and entrepreneurs, read on.

  • Look beyond the rate hike to consider the overall lending climate and overall prognosis for U.S. businesses. Credit has been very tight after the Great Recession – especially for smaller firms. The rate hikes mean that borrowers will pay more interest, but their chances of securing the loan they need have increased exponentially. When confidence in the economy accelerates, banks and lending institutions are more likely to approve loan applications from qualified applicants. Major banking institutions approved 24.1 percent of loan applications in February 2017 – making it the seventh consecutive month of positive growth.
  •  Change gears if the time is right. Interest rates hovered around 2 percent or 3 percent for a long time, and many of us got used to it. Now we are seeing rates increase and the Fed is indicating more gradual increases might be on the horizon. If you have expansion or improvement plans in your back pocket that will require bank funding, it may be time to seize the moment. The cost of borrowing will – most likely – continue to increase.
  • Check out your local banks. Borrowing is expected to get easier for customers of smaller banks as well as large institutions. Amongst big banks, loan approvals currently are about one in four. Regional and community banks have not seen a big shift in approval rates in the last few months, with rates hovering around 50 percent. However, if the Trump Administration makes good on its intentions to reform the Dodd-Frank legislation and reduce the regulatory requirements on smaller banks, then banking analysts expect credit will flow more easily to Main Street.
  • Consider re-evaluating the basic tenets of your financial plan. Is it time to review your credit scores and address any issues that will improve how credit-worthy you appear to potential lenders? Perhaps now is the time to consolidate some of your debts. If you are paying off high-interest credit cards or other similar debts, consider taking advantage of today’s economic optimism to secure a loan with lower interest rates – and do so while these rates remain relatively modest. Decisions like this should be taken only after proper research and after consultation with your tax and financial planning professionals.

Despite daily newspaper headlines featuring political issues, the U.S. economy continues to look good and the Fed’s recent actions underscore the optimism. Make sure you and your business are ready to take advantage of the opportunities this presents.