Don’t worry, just file a tax return extension! The IRS realizes that not everyone has a quick and easy return and if you are a real estate investor, your return is probably not “quick and easy”. If you feel like you are rushing to get everything together and feel the stress of that rush, it might be a good idea to file an extension.
NOTE: Extension are only for additional time to file. All taxes due are still due on the actual due date. The best way to get the tax paid on time is to estimate what you owe. Contact your CPA and ask them to prepare an extension payment calculation for you using the information you have received so far. If you are not sure what your profit or loss will be from your rental properties, use an estimate along with the rest of your tax documents. If your extension payment ends up being more than you owe, then you can have the excess refunded when you file your returns.
HERE ARE A FEW REASONS WHY IT MAY BE IN YOUR BEST INTEREST TO FILE AN EXTENSION:
- No Penalties for Filing Extension
- Less Chance for Mistakes
If you have a new investment, you may not be sure what documents you are supposed to receive. If you miss a document, the error is fixable, but this will probably be at an additional cost to you.
Then there is increased risk that your CPA or tax preparer will make a mistake in the RUSH of getting the huge volume of tax returns prepared in a short period of time. Most tax preparers are working LONG hours during tax season, so that increases the likelihood of a mistake, as well as added IRS audit risk. So why not extend and make sure you don’t miss anything and give your preparer more time to devote to your taxes?
- Time is on Your Side
Extending your returns will give you additional time to ensure your taxes are done correctly and that ALL of your tax deductions are captured and you receive the maximum refund possible!
- Power of the Roth IRA
If your investments didn’t grow as well as you expected, you are able to undo the conversion and put the funds back in a traditional IRA. After your taxes are filed, this perk is gone.
- Retirement Planning
- Multi-Year Planning
Potential strategies include changing accounting methods, making elections to carry-forward or carry-back certain losses or taking advantage of the bonus depreciation or cost segregation for real estate. With a better idea of how the following year will turn out and what new tax laws might be, you can make better informed decisions.
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