Tax and Financial News for April 2017

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Tax Extension Filing Tips

Tax ExtensionIt’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.


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