Monday, April 16, 2007

2006 Tax Return Extension Filed

Originally, my goal was to file my 2006 tax return by April 17, 2007. However, I have decided to file for an automatic extension to August 15, 2007 using form 4868. While the extension delays filing, one must still pay any underpayment of taxes due by the original due date. Thus, I sent in an additional 20% payment for my taxes.

Here are my reasons for filing an extension:
  1. Missing Schedule K-1 for an investment. We had invested in a local sports bar LLC based on the success of the principal in a current business. In 2005, the business broke even and was expected to be profitable in 2006. Unfortunately, the principal had a heart attack and passed away. This has resulted in some of the paperwork being delayed since the principal handled all the business documentation.
  2. Absence of AMT tax. After two consecutive years of paying an AMT tax, we did not owe an AMT tax this year. While I am happy not to pay the tax, I still do not understand why I don't owe the AMT tax this year. Frankly, that bothers me and I am concerned that there is a small probability that an error is the cause. After working on the AMT part yesterday, I think I have found the answer and confirmed my original estimate is correct. However, I decided it would be a good idea to recheck my numbers again.
  3. Make sure I get the tax breaks for which I am qualified. Since I owe taxes this year, I wanted to be extra sure I didn't miss any tax breaks (charitable contributions, tax credits, or loss carry overs) that can help reduce my taxes. While finding all tax breaks is important every year, it feels more critical this year, since I owe so much. :-)

As usual when owing taxes, I sent in the extension certified to have proof that the additional taxes were paid on time.
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Photo Credit: Internal Revenue Service

This is not financial advice. Please consult a professional advisor.

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