Mark Kohler and Matt Sorensen explain when to file a tax extension for 2023. Filing late can lower audit risk because returns processed after quota limits face fewer audits. Extensions also give you time to find deductions, organize receipts, and handle multi-state complications.
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Guys, this is the deadline. If you didn't know the tax return deadline, April 18th is upon us. So we want to go over some of the strategies for you procrastinators that are not ready. Whoa, whoa, whoa, whoa, whoa, whoa.
Now see right there, I would say for those that are strategic and filing an extension.
Yeah. If you're sending something into the IRS that says refund, sure, get in early if it's okay. Give yourself some time. But you got to know the steps to make sure you're not screwed up because you got to let them know that you're going to extend.
Yeah.
You don't just get to like ask for free forgiveness later.
And I'm going to add a caveat. I don't know if it's. If you're getting a refund, do you have a side hustle? That to me is the trigger.
Because if business in general.
Well, yeah, yeah, business. Or if you have a business or at least a side hustle, that means we've got something to work with. That means you can massage your tax return. Who wants to go in and get a five minute massage in the airport bent over some chair? You don't want that. You want the 60 minute massage. You want to take your time.
Custom massage. Yes.
We should explain April 18th. A lot of people are like, I thought it was April 15th. What are you guys smoking?
Yeah. What's going on in Washington, D.C. which, you know, they're smoking a lot of stuff there. So, yeah, April 18th. Usually it's April 15th. And this is for your individual returns.
The reason why it's the 18th is the 15th falls on a Saturday. There's a federal holiday on Monday. And so the IRS kicks it to Tuesday, you know, because you got to mail it. And if the post office closed on the 15th and the post office is closed on Monday, that's where the 18th comes in. So this year you got till the 18th. Okay, so here's our topic. Should you file an extension and why. Okay. Should you file an extension? What do you think?
Well, I always file an extension myself and there's a number of reasons I do that. One is I am still getting my crap together. Let's be honest.
Yeah.
And that might be some of you out there. One, and I just got married last year.
Congratulations.
My wife Michelle is like learning, being, you know, she's a corporate W2 person.
You know, she's like, we're filing.
She's like, wait, are we not getting our crap together on April 15? Does my account need to talk to your Accountant. And so I'm like, babe, we're going to be extending from here on out.
Just buckle up.
Welcome to being married to an entrepreneur.
Okay, now that. Yeah, now that's one reason. And number two, and there's multiple reasons, usually another one is, is the massage point. I wasn't kidding. I mean, yeah, you need time to get your stuff together, but at the same token, it gives you a chance to really dig up any additional write offs. Really think strategically. Did we go after every expense on all those credit cards? Was there anything in cash? Was there anything in receipts? Did we buy something new? Did contribute a piece of equipment? If you're in the rush for April 18, your accountant is not taking the time to think about that, and neither are you. So getting your crap together is AKA for I'm going to kill it on my return. I want to do a good job. Yeah.
And I'll say the clients that have the most clean books, that have really taken the time, that are on top of it, are the ones that have the most write offs. They're not missing stuff. They're not missing the thing that they got at Costco when they were buying their personal stuff that actually used in their business. They're remembering that stuff. They're catching it. So when you rush, you end up missing those little things.
Man, you just brought up Costco. I'm getting hungry. Anyway, so now the third reason why I think extending is a phenomenal idea is you reduce your chances of an audit. Recently, we've got in our Certified Tax Advisor program, an accountant. One of his buddies works at the irs. But what happens at the IRS level is it's broken into districts, the different areas of the country. Well, what the IRS does is assign its audits based on a quota system by district. And what are they going to do? They're going to pick off with their little expert rifle all of the audits they want to do with the first ones walking through the door. So they assign those audits. And we've got great information on this inside info. And it's very common, most accountants know this, that by June, July at the latest, all the districts, their hoppers are full. They're like, we've assigned all our audits. We're done. So their computer system's kicking out all the audits. So by the time I file my return in September, October, all the suckers have already been picked off and put into the hopper.
You've already sucked up as many as they need. IRS agents are overwhelmed. They don't need to get More audits. And so that's when you want to show up. You don't want to be the cavalry that goes out first. Right. And gets slaughtered. You know, you want to be the knight that comes up at the end or the king that just marches through once all the battles already occurred.
This is literally a fact. All the accountants know that there's statistics that show that you have much, much less chance of an audit the later you file.
Okay, I thought it was like 13 times less likely to be audited if you file an extension.
Yeah, it's. There's a lot of stats out there. So you thought you were done. Two words, state taxes.
Yes. You still need to pay into the state too. And follow these same formulas though. It's really the same thing. Look at what you paid last year in the state. Are you in the same position? Do you have more income? Apply the same effective tax rate if you have a little more income. But I will say this on the states, just from personal experience, and this is Matt Soren's personal experience and some years I don't like to relive again where I got behind on my taxes. And also for some clients, the states are nastier than the irs. I was just gonna go with this stuff.
Yep.
They will lean you so fast. So be careful. The IRS is a little slow, not as hip to the hop. The states are like, man, I just put that sucker in the mail and they're already after me.
Yeah, I. In fact, I would say this. If you don't have enough for your federal and state, get your state deposits in first. Make sure you're covered there with a cushion. Then throw the rest you can at the Fed. You may think, oh, I live in Arizona. Oh, X. Okay, I'm cool. Do you have rental property in another state? Did you have sale in another state of rental property? Do you have part ownership in a business in another state? Are you getting a K1 from even a fund that you might be invested in in another state? So you may be filing a partial state tax return in other states and then go, oh, I didn't send in a deposit over there. Well, think big. A lot of people more and more file multi state returns because people are investing all over the country.
Yeah, yeah, you should, you should be chasing down where the opportunity is. Even you know, how many of our real estate clients you know that are successful go buy in the states where it's good property, good real estate. They're not just looking in their own backyard necessarily.
Yeah, okay. Well, thanks everybody for being here. We're not going anywhere. We want to have a great 2023 with you, help you build your American dream. We're right alongside you. All right, thanks, everybody. Have a great weekend. We'll see you next week. Number two, how much should you send in with it? It's okay to extend. It's actually strategic to extend. But does that mean you have an extension to pay?
