ABC Taxes, Tips & Tools

Tax day is tomor­row a short 3 hours away Phoenix local time, tomor­row most indi­vid­u­als, sole-proprietorships and part­ner­ships have to either file their 2009 tax forms or file for an exten­sion.  Either way the dead­line to pay taxes for 2009 with­out penalty is tomor­row as well.  In this timely note — we would like to take the time to answer one ques­tion we are fre­quently asked.

“I do not owe any money, why should I file a tax return?”

• First and fore­most is to get the 3-year clock run­ning on the time the IRS can audit you (the  3-year clock assumes you are not com­mit­ting tax fraud or oth­er­wise sig­nif­i­cantly under-reporting your income, which can extend the clock out indef­i­nitely in some cases).
• The sec­ond rea­son is that you may be aware of the deduc­tions that indi­cate you do not owe taxes, but if the IRS com­pletes a sub­sti­tute for return (SFR) for you they will not include any of them; by the time the IRS com­pletes an SFR you may have a hard time lay­ing hands on the doc­u­ments for all of your deduc­tions, and you will still have to deal with the IRS even if you can find all those documents.
• A third rea­son is that there is a time limit on how far back you can go for claims of refund–if the US Trea­sury owes you a tax refund, you do not have for­ever to get it.
• A fourth rea­son is that you may be required to file if you have suf­fi­cient income.  Not fil­ing is not an option in some cases.

But there is a new case (David­son V Com­mis­sioner, TC Memo 2100–38)  that indi­cates yet another rea­son to timely file.  Gen­er­ally a  loss is car­ried back­wards for sev­eral years and then car­ried  for­ward if there is not enough income in prior years to absorb the losses.  How­ever a tax­payer may elect to carry Net Oper­at­ing Losses (NOLs) for­ward first on a timely-filed tax return, but if the tax­payer files late they lose this option.  In this case the tax­payer sus­tained losses in 2001 & 2002 but had income in 2003.  He did not file returns until 2007.  He wanted to carry the 2001 & 2002 losses for­ward to off­set the 2003 income.  Because he filed his tax returns late he was not able to carry the losses for­ward to 2003.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in. The con­tent of this blog gen­er­ally applies to busi­ness and indi­vid­ual tax­a­tion in the United States of Amer­ica.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant, human resource spe­cial­ist, or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.