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In this episode of the Teaching Tax Flow podcast, Chris Picciurro and John Tripolsky shine a spotlight on the often misunderstood concept of tax extensions. Together, they delve into the strategic benefits of utilizing tax extensions, debunk common myths, and provide listeners with a valuable perspective on how to integrate this tool into their financial planning.
Chris and John explain that a tax extension is not a signal of negligence or a red flag to the IRS, but rather a strategic maneuver to ensure accurate and comprehensive tax filing. They stress the importance of understanding that tax extensions grant additional time to file returns, not to pay taxes, and they illustrate scenarios in which taking an extension can be beneficial. The discussion emphasizes how tax extensions can aid in maximizing deductions, aligning deductions with high-income years, and reducing potential errors and audit risks.
They also share insights into specific tools like cost segregation studies and SEP IRAs, which can play a critical role when extensions are adequately utilized.
They also share insights into specific tools like cost segregation studies and SEP IRAs, which can play a critical role when extensions are adequately utilized.
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- (00:04) - Tax Extensions as a Strategic Planning Tool
- (05:33) - Tax Extensions as a Planning Tool and IRS Partnership
- (06:57) - Optimal Timing for Better Experiences in Dining and Services
- (09:13) - The Importance of Filing Tax Extensions Accurately and Timely
- (11:06) - Strategic Tax Planning with Bonus Depreciation and Deductions
- (13:08) - The Benefits of Filing a Tax Extension
- (15:06) - Tax Extensions as Strategic Tools for Business Owners
- (16:39) - Understanding Tax Filing Extensions and Their Limitations
- (18:38) - Financial Advice Disclaimer and Affiliation Details
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What is Teaching Tax Flow: The Podcast?
Welcome to “Teaching Tax Flow: The Podcast”, the show that’s all about demystifying taxes and helping you keep more of your hard-earned income in your pocket.
Hosted by tax experts from the Teaching Tax Flow team, this unfiltered (but clean) podcast is designed to empower you with the knowledge and tools you need to confidently navigate the world of taxes. We’ll cover everything from understanding tax laws and regulations to maximizing deductions and credits.
In each episode, we’ll break down a specific tax-related topic in a clear and accessible way, providing practical tips and strategies you can use to optimize your tax situation. We’ll also answer listener questions, share the mic with amazing guests, and share real-world examples to help illustrate key concepts.
Whether you’re a freelancer, small business owner, real estate investor, or just looking to understand your taxes better, this podcast is for you. So tune in, take notes, and start building your confidence in taxes today.
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www.TeachingTaxFlow.com
Hey everybody, and welcome back to the Teaching Tax Full podcast episode 182 today. We're visiting an old friend, but maybe a new friend for you. We're going to talk about tax extensions And I wouldn't necessarily maybe no, let's not call it a get out of jail free card. But the one thing you're going to learn from this one if you haven't done so already on previous podcasts, quick tips, discussions, we've talked about this a 100 times, probably. A tax extension is not a nail in the coffin, can we say?
John Tripolsky:It's not a welcome invite for the IRS to come in and audit you. It's really not anything to your detriment. Of course, there's a couple things, though, when it comes to payments due. But a tax extension, we're gonna dive into and why it's a great planning tool. So you don't wanna hear from me, as always, Picciurro.
John Tripolsky:Welcome back to your own show, sir. Let's let's ring the bell with this guy. Let's get it back in. Timing's perfect with the deadline coming up. Let's get into it.
Chris Picciurro, CPA:Well, I'm happy to be back. You know, we're passionate about this topic. We've had a lot of other content on our defeating taxes YouTube channel about tax extensions. Before we get started, I wanna be clear. Remember, a tax extension provides you extra time to file your return, not extra time to pay.
Chris Picciurro, CPA:So if you think you're gonna owe tax on a return, definitely make an estimated payment with the extension. I wanna just get that right out of the way immediately, and we're gonna talk about why tax extensions are absolutely not taboo, and they are an amazing tax planning tool, a really a secret hack our private CPA has been using for years. Oh, I will give you one bonus hack about that extension payment real quick before we start talking about why tax extensions are a planning tool. Let's say, you know, you're so April 15, this this this quote unquote, what I like to say fictitious deadline, but it it it is a an important day in the tax calendar other than it being your birthday, John, by
John Tripolsky:the way. I was gonna say, it is a very important day, sir, and you cannot extend that date. So
Chris Picciurro, CPA:cannot. No. No. You might want to.
John Tripolsky:I try.
Chris Picciurro, CPA:But, but with April 15, it's the also the due date for your the first quarter estimate for the current year. So if it's 04/15/2026, your first quarter estimated tax payment, if you are someone that pays your taxes quarterly, you're a real estate investor, you're a someone self employed, you are a business owner, you have a lot of investments. That's due April 15 as well. A little hack you could do is make a larger payment in lieu of your first quarter, current year payment on your tax extension, and that way you automatically walk into the next tax year with an overpayment and avoid penalty. So again, tax extensions are a planning tool.
Chris Picciurro, CPA:The goal of tax preparation and tax planning for that matter is to legally and ethically reduce the tax you pay in your lifetime. For tax preparation, it's get you the absolutely the best result possible on that particular filing. With time getting compressed, meaning, you know, just getting information from different data sources getting tightened. You're not a lot of times, you're not even getting your source documents as a taxpayer until middle, late February, maybe even March. Many, many people in our private tax practice clients don't have a lot of their documents yet because they're part of businesses that have also extended their tax return.
Chris Picciurro, CPA:With that getting tighter, the ability to get the best result possible is harder because what have I been preaching, John? Not my number. The American Institute of CPAs is saying seventy five percent of CPAs are retiring in the next fifteen years. That stat came out a couple years So we have what's called a retirement cliff. We have what's called a pipeline issue, meaning not as many people are entering the workforce as tax professionals.
Chris Picciurro, CPA:Meaning, supply is getting tighter. Lead time because you don't have your documents is getting tighter. The April 15, quote, unquote, deadline is not going anywhere. So tax extensions allow you extra time to get the best result possible, and that could be for a couple different reasons. I'm gonna explain those next and also another little I'm gonna sprinkle a little secret sauce, Jotty, from our private CPA practice on how tax extensions could be a another a tax planning tool and help us time deductions.
Chris Picciurro, CPA:Because remember, you wanna pair your deductions in the tax year that you have the highest marginal tax rate and that could be a depreciation deduction. It could be a cost segregation study. It could be a variety
John Tripolsky:of things. So. Yeah. And really tax extensions, right? Like, if somebody's getting into this, most people have heard about tax extensions, but it and again, full transparency, years back, I always thought, like, why would you wanna file an extension?
John Tripolsky:That's like telling the IRS that you don't have your act together. You're not ready for them. They're waiting for you. It's really not the case at all. I mean, I don't know if this came up last week or at some point, we were talking it.
John Tripolsky:It's it's almost like the analogy of, you know, it's not like you're showing up late for class you're going to get your hand slapped and there's repercussions for that. If the IRS didn't want you, I wouldn't say want you, didn't offer you the option for a tax extension, they wouldn't offer it to you. It's as simple as that and you would just not file and then pay penalties and interest on it. Of the course, payment thing is a whole another thing. But realistically, and I'll let you talk about this, right?
John Tripolsky:It's it it is almost, I'm sure that they like it. But a certain sense too, because it's not, you know, you're not showing up with all your stuff theoretically, showing it up, you know, throwing on the proverbial table and saying, here you go, do it. I met my deadline. Now, you know, give me my refund. Do something.
John Tripolsky:You're you're helping things out. You're spreading it out and then, you know, obviously, we're going to talk about how it's more of a tax planning tool, not just more time to prepare.
Chris Picciurro, CPA:Well, let me think think of twenty five plus years ago when I started in this profession. You would file for a four month extension and then you have to file again with an explanation for another two month extension. Now, the IRS just automatically grants you a six month extension. You just have to click a button and e file an extension or mail it in. No questions asked.
Chris Picciurro, CPA:So, what's that telling you? We talk about your tax agencies or your involuntary business partner. Your business partner is making it easier for you to extend. Now let me ask you this question, John. There's a what's your favorite restaurant?
Chris Picciurro, CPA:Oh. Please don't say that agricultural based one in your
John Tripolsky:I'm not. So you know what? Believe it or not, if anybody's in Chelsea, Michigan, right, right on 94. So it's a scrappy little joint called Stivers. Check it out.
John Tripolsky:It's been there since the seventies.
Chris Picciurro, CPA:You wanna go in there, John? Do you wanna go in there on Saturday night at 6PM? Or do you wanna go in there?
John Tripolsky:No. I wanna go on the Saturday at 1AM. It's been no. I mean, I I get where you're going with this. No.
John Tripolsky:No. I wanna get there at 04:30, 05:00 at the latest, less people.
Chris Picciurro, CPA:How about just go there on Tuesday at 1PM? Even think about that. So my point is, if you're trying to smoosh things in and get their tax return done by April 15 and you're working with a tax professional that can barely walk and chew gum, that's been working their tail off, that's looking at 25 tax returns a day, do you think that experience is gonna be as good as just going to the same restaurant Tuesday at 1PM? Prices might even be better Tuesday at 1PM. You're gonna get a better experience.
Chris Picciurro, CPA:You're gonna you're gonna be working with a professional that's rested, that's focused. And so just from that perspective, you don't wanna go, you know, it's like when you take your John, you you know, like, let's say you're taking your daughter to her first Detroit tiger game. Right? Now tigers are actually good right now. If you took her to a game on a third a matinee Thursday, we call it a getaway game, Thursday at 01:05, there'll be a good crowd.
Chris Picciurro, CPA:There might be 25,000 people there instead of 50 or 45. But if she wants to get up 10 times, you're not asking all these people to get up and move every time. But if you take her to as, you know, a game on a Friday night at 7PM and it's sold out, because she's not that that's gonna be not as good of an experience for you or her. Right.
John Tripolsky:So There's so many analogies I think we can, you know, pull in and relate it to people. It's like going to the secretary of state, the DMV. You never wanna go on a lunch break because everybody's there, and the person behind the counter is just frankly pissed. So
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John Tripolsky:Again, tax extensions. I I think and I know you've talked about this, and I know we're gonna probably say this 10 times again. It's for it's not automatic, though. So you can't just say, oh, I'm not gonna make the deadline. I'll take care of it months down the road.
John Tripolsky:You have to take action before the deadline.
Chris Picciurro, CPA:So you've yeah. You file an extension, and many states follow a federal extension as well. So let's just talk from the federal side of things. Extend your tax return. It's very easy.
Chris Picciurro, CPA:If you wanna make if you always think you're gonna owe money, make that payment. You'll get the money back if you overpay. Why do you do this? One, overall, it's gonna give you the best result possible. It allows you more time to gather your information.
Chris Picciurro, CPA:There might be deductions. There might be things that quite frankly you forgot about. I can't tell you my twenty five plus years. It's there's countless times people thought they were scrambling and rushing around. I've had clients file and forget they got married.
Chris Picciurro, CPA:I'm not kidding you. Forget they had children. Forget they went to college classes. And then they have to go back and amend the returns, which cost them money. And the amending returns, it takes them more time to get that money back.
Chris Picciurro, CPA:They would have been better just taking the time to gather their documents. It allows better tax accuracy. Right? Because, you know, it if you're more organized, you're going to get a better result. And reducing errors reduces your audit risk, which is good.
Chris Picciurro, CPA:It allows for better timing of decisions. This is the one thing, the special sauce I'm gonna sprinkle on you. I want you to think about this, John. You're a business owner. Right?
Chris Picciurro, CPA:Especially people that are self employed or business owners. You're you bought a piece of equipment at the end of, let's say, it's the 2025. It's now 2026. You bought that piece of equipment. Now we've had hey.
Chris Picciurro, CPA:Remember section one seventy nine? Oh, yeah. Episode one seventy nine. Go check that out. Bonus depreciation.
Chris Picciurro, CPA:You think that you had a big year in '25, but '26 is off to a great year. Your income in 2026 is triple that of 2025. I've seen it all the time. Let's say you landed that big client. You you have that big contract.
Chris Picciurro, CPA:You you sold that house. Wouldn't you be better off taking the deduction for that and maybe electing out of the bonus depreciation and pushing more of the deduction in 2026 and '25 on that Yeah. Well, you don't we don't have a crystal ball. So why don't you extend the time to make a decision, man? You could have until October to decide the timing of that deduction by just extending '25 and seeing how's '26 going.
Chris Picciurro, CPA:Maybe '26 isn't as as good of a year as '25, and you're thinking, okay. I actually wanna have more of that deduction in '25. But if you scramble and try to file everything quickly, you then throw that opportunity away.
John Tripolsky:I love that you brought up the crystal ball. Right? Because really, this may be the closest thing to anybody actually having one in almost all aspects of one's life. Right? Like, it's very far and few between that something reoccurs annually that you can have a tool like that.
John Tripolsky:It's true. I mean, I can't think of any. I mean, you can't the real estate market sure isn't like that. I mean, inflation kinda maybe sorta is is like that, but not really. This is probably it.
John Tripolsky:And it's a tool too, Chris. I mean, it's you know, as we talk through this, say somebody does this for a couple years. Right?
Chris Picciurro, CPA:Mhmm.
John Tripolsky:Should they or should they not be afraid to use this every year? Because I'm sure that question's gonna
Chris Picciurro, CPA:come up. I mean, the first time you file a tax extension is the is the hardest, just mentally. But then you realize, oh, that makes sense. That allows me to now, again, let me talk. Let me explain something.
Chris Picciurro, CPA:If you can get the best result possible. Before April 15, then file before April 15. I'm not against filing, you know, before that deadline. All I'm trying to tell you is April 15 is a fake deadline. It could be extended till October 15.
Chris Picciurro, CPA:The bottom line is get the best result possible, meaning you're working with a great tax professional that can give you them undivided attention. You're organized, and you have all your documents. If you get all those three and it's February 8, then file February 8. But a lot of times you don't, and don't be afraid to take that extra time. It's like taking a really difficult test.
Chris Picciurro, CPA:If the if you're taking the ACT or the SAT and they say, well, you can you can do this in, know, two hours, but if you want, you could extend it for an extra hour. If you whip through it an hour and you're gonna get the same test result, good. But for most people, they wanna really think this through, so take the extra time.
John Tripolsky:Yeah. It's it's almost like the goo it's like the Google Maps or Apple Maps of Wave in or ways of tax planning. Right? Like, you can see what's way down the road. You know?
John Tripolsky:And then when you get there, you're a lot happier than realizing there's construction 300 miles into your road trip.
Chris Picciurro, CPA:Yeah. It's gonna cut down on if you're scrambling on mistakes. Damn. I'm gonna wrap with this. There are a few things.
Chris Picciurro, CPA:So I've already mentioned that, you know, having a tax extension is like having a crystal ball till the next year. There are a few different there are there are more than this, but three main deductions or credits that get extended with a tax return that we use in our privacy pay practice often. The first one is our retirement plan contributions for business owners. So your SEP IRA, your solo four zero one k plan, maybe your defined benefit plan. When you extend your tax return, you extend the window to make those contributions and still count them for the previous year.
Chris Picciurro, CPA:This doesn't pertain to traditional Roth IRAs or IRAs. But extending your tax we have several clients that make a very large SEP IRA contribution that intentionally extend the return to give them an extra six months to fund the SEP, which further reduces the amount of tax they pay for the year before. That's number one. Number two, if you're eligible for a research and development credit, it gives you extra time to put your documents together to receive that. That's a very complicated credit in a complex calculation.
Chris Picciurro, CPA:So take the extra time and get it right to get you the best result possible and extend that time to take the research and development credit. The third one, we talk about a lot are cost segregation studies. I want to see what your income looks like before we commit to the cost segregation study in that given year on a piece of real estate. We might not do it that year. We might bump it to the next year.
Chris Picciurro, CPA:That's all possible with tax extensions. So please and there's there's absolutely no evidence in my over twenty five years of doing this. You could tell I'm a little fired up about this. That leads to tax extensions increasing your audit risk. In fact, I would argue they reduce your audit risk because you have more time to get your stuff organized.
John Tripolsky:And I like it.
Chris Picciurro, CPA:So don't be afraid of them. It's a tool. Use the tool if you need it.
John Tripolsky:And and somebody just told you that, everybody who's listening to this, a guy that's been doing this for a quarter of a century, so we can date this bald headed, beautiful gentleman that he he's experienced now. He's truly seasoned. He knows what he's talking about. But and thanks, Chris, for diving into this. I know this is definitely a hot button topic.
John Tripolsky:Right? And you mentioned it too. It's getting after that first one, it's it's much easier. You know, people realize, and it it's more of a mental game than anything else. So give it a try.
John Tripolsky:And I mean, I've benefited from it. I mean, I I can personally say that. I mean, even just talking to, you know, people with YouTube, it's some people don't realize it until they do and say, wow, you know, it's I'm not trying to cram this all in. I'm not missing things. I'm not sending documents in, and it says one more zero in it or one less zero, totally screws everything up.
John Tripolsky:It's a better situation. And let's close on this, Chris, before I I give a couple resources to everybody as well. So, again, reiterating it is it's an extension to file, not an extension to pay, but it's also not an extension for funding, say like an HSA and some other items. Like that is a dead stop around that fifteenth for the previous year. You're only extending your time to file federal returns, correct?
John Tripolsky:Correct. Awesome. I feel smart now. That's maybe why I love this topic so much. Alright, everybody.
John Tripolsky:Thanks for joining us on this one. We'll see you again here back here on the Teaching Tax Flow Podcast. And be sure now check out defeatingtaxes.com. Some great resources on there. There's a community, a book even by this gentleman here.
John Tripolsky:Check it out. We're there for you. Drop us a line if you have any questions. Have a great week, everybody.
Disclosure:The information in this podcast is educational and general in nature. It reflects the opinions of teaching tax flow and does not take into consideration the viewer's personal circumstances. It is not intended to be a substitute for individualized financial, legal, or tax advice. Consult the appropriate qualified professional prior to making any decisions. Securities are offered and supervised through Cabin Securities Inc member, FINRA SIPC.
Disclosure:Investment advisory services are offered and supervised through Cabin Advisors LLC, an SEC registered investment advisor. Chris Picciurro is a registered representative of Cabin Securities and an investment advisor representative with Cabin Advisors LLC, teaching Tax Flow as an independent entity and is not affiliated with Cabin Securities or Cabin Advisors.