Does just the thought of preparing your income tax return this year make your blood boil? And when you’re done, do you break out the champagne and celebrate like it’s New Year’s Eve? (Or just reach for the Tylenol?)
Well, guess what? I’m going to suggest that you inflict yourself with that same punishment twice, because it may be that filing a return not once, but twice, for the same year can put hundreds or even thousands of dollars in your pocket.
Here’s a little known tax fact: If you overlooked a deduction or made some other mistake on a previously filed return, you have three years from the due date of the originally filed return to file a correction, also known as an “amended” return.
There is one correction in particular that you should now take a close look at — something known as depreciation and the Section 179 Deduction.
If you chose to depreciate your business equipment, usually you could switch to the Section 179 deduction only if you filed an amended return by October 15 (for sole proprietorships and partnerships) or September 15 (for corporations) — just a few months after the original due date.
Well, the IRS finally came to its senses. You now have the three full years from the due date of the originally filed return to change from depreciation to the Section 179 Deduction.
Still with me? I sure hope so, because this apparently minor change gives you a great opportunity to recoup some tax money from the IRS much more quickly than you would have otherwise. I’ve seen many tax returns where the taxpayer or the accountant didn’t even know about Section 179 — and the result was a much smaller deduction that the law allowed.
So check your 2005 return for Form 4562; if any depreciation was deducted for equipment bought in 2005, you have until April 15, 2009 (sole proprietorships, partnerships) or March 15, 2009 (corporations) to make the switch.
Filing an amended return to report the Section 179 deduction could literally double, triple, or even quadruple the amount of business equipment expense for year 2005. And if you didn’t take the Section 179 deduction in 2006 and 2007, you’ll have the 3-year grace period to amend those returns, too.
Why pay more tax now than the law requires? Check your 2005, 2006 and 2007 returns for any possible missed deductions and do an amendment today.
Wayne M. Davies is author of 3 ebooks on small business tax reduction strategies. For a free copy of his Special Report “How To Instantly Double Your Deductions”, visit YouSaveOnTaxes.com.
