JDawn Consulting


The Mass Delusion of April 15th (or, Why Form 4868 Is Your Friend)

Hello friends! Today I want to talk about extensions. This is a timely topic because after giving a deadline of March 1st for a guaranteed April 15th filing (yes, smartypants, it’s the 17th this year), I have spent the last ten days trying to talk clients who I still want to work with into extending their returns. Some people agree right away, some people are a tough sell, and some people won’t even let me finish the sentence before they refuse.

Why are people afraid of extending their returns? I was discussing this phenomenon last week with my officemate Ben, and he referred to it as a “mass delusion”. I think that sums it up nicely. We have all been conditioned to focus on that April date. A barrage of advertisements from software and various Big Tax Prep companies (now THAT is a topic for a later blog). In the days before efile, local news crews loved to show B roll of late night traffic jams outside the Post Office. It sure seems like you have to file by April 15th, right?

You don’t.

Not only are you allowed to extend your return, it’s so not a big deal that you get a six month extension automatically just by filing Form 4868.

When you extend your return, not only do you get to partner with your chosen tax professional instead of settling for whoever can work you in, but statistically your return will be more accurate because it’s not being prepared by me and reviewed by you under a time crunch. It’s just a way more chill process (for both of us) to file your taxes in, say, June.

One very important thing to note is that filing an extension extends the deadline to file your return, it does not extend the deadline to pay your taxes. Therefore, if you think you’ll owe a balance on your return, it’s best to make an estimated payment when you extend.

If you’re interested in extending your 2017 tax return, send me an email. I charge $25 to file an extension which is then credited against the final invoice for your tax preparation.

Dawn Howard
It's your money. Go get it.

For the year that I’ve been in been in practice (in fact, today is my one year anniversary!), particularly after I posted In Praise of the Screw-Up Client last summer, a large portion of my client base is people who have gone a while without filing tax returns. While that is always a suboptimal position for a taxpayer to be in, it’s not always for the same reason. When clients dealing with this come to me, they are always worried about owing a ton of money (very possible) or “going to jail” (pretty dang unlikely). But after I sit down with them and talk about their situation, another scenario often emerges.

What if the IRS owes you money?

If you’re a 1099 worker who hasn’t filed because you didn’t make your estimated tax payments, this is not you (still -you’re a good person! I can help you!). But if you’re Average Joe/Jane/Jxe who gets a W-2 and hasn’t filed because life got in the way, there’s a good chance you have a refund coming. That form you fill out when you start a new job is designed to withhold too much tax because IRS has learned the hard way that it’s easier to get your money up front than it is to chase you for it later.

Now, it doesn’t take a CPA to figure out that the IRS can’t charge interest and failure-to-pay penalties on a tax debt that doesn’t exist. But what a lot of people don’t know is they can’t charge you a late filing penalty either. That’s right. If you file a late return and you’re owed a refund, you get the whole refund back. Of course, IRS won’t pay you interest - even though they charge interest if you owe tax – but that’s a different blog for a different time.

Speaking of one-sided rules that work in the government’s favor… if you owe tax, the three-year statute of limitations for the IRS to come get it doesn’t start running until you file your return. However, if you are owed a refund, the statute starts running immediately. Cool, right? What that means is you only have a certain window of time to catch up on filing old returns and claim a refund.

So, how far back can you go? Glad you asked!

The three-year statute starts the day the tax return was originally due. Your 2014 tax return was due April 15, 2015 which means your window closes April 15, 2018. You have a little over two months to get that return filed. I hope you’ll find the time to dig through your stuff and make that happen. But if life is still getting in the way, you still have another year before the 2015 refund window closes, and so on.

As always, if you have questions about this or any other tax / accounting / personal finance concerns, please reach out.

Good luck. Get paid.

Dawn Howard
So You've Decided to Cohabitate...

Good for you! Love is a many splendored thing, and nowadays a record number of couples are enjoying that splendor without getting married.

If you’re like most folks, when you shacked up you made an agreement to split all costs straight down the middle. There is an interesting theoretical conversation about whether that’s appropriate when different occupants earn markedly different salaries. But I’m not your couples therapist, so we’re going to skip that part.

When you’re renting, this is all super easy. The rent is X, you each pay half of X, life is good. But what about when one of you (and by “one of you”, I mean “the bank”) owns the space?

Well, that’s different.

But why? Can’t you just split the monthly mortgage payment like you would rent? You could. But one of you may be getting a raw deal in that scenario. The reason is quite simple and has to do with an enormous government assistance program that’s specifically targeted to people who think they don’t need government assistance programs. That’s right: deductions for mortgage interest and property tax.

I have a lot of clients and friends who think by splitting the monthly mortgage payment they are splitting the expense. Not true. The person whose name is on the mortgage gets to claim deductions for the entire amount of interest and property taxes for the year, even though they only paid half.

Hardly fair, right?

This is all solved fairly easily by determining the value of those tax deductions and allocating it via an unequal split in the monthly mortgage payment. Or whatever else you might negotiate. Maybe the homeowner bears the bulk of the repair costs. I’d go for laundry duty, but that’s just me. As with all things in relationships, communication is key.


Though I’m not taking new clients right now, I still love talking to y’all about interesting things that cross my path. If you have a question or situation that you think would make a good blog post, give me a shout.

Dawn Howard

[Note: I’ve not yet found a gender-neutral pronoun that sounds elegant to my ears so please forgive the antiquated “he” throughout.]

I’ll tell you a little secret about what I do. Tax work when the client comes in with his records in pristine condition and just needs me to translate that to a return isn’t that fun. Bookkeeping work when the client does everything right and just needs me to take a look and bless it isn’t that fun.

Now that I read that, it probably isn’t all that much of a secret, huh? Don’t get me wrong, I still like that work because the CLIENTS are fun. But what I want to talk about today is what is to me a very underappreciated part of CPA life: The Screw-up Client.

The Screw-up Client doesn’t have his financial life together for any number of reasons. I have clients who have emotional issues around money so severe they discuss them with a therapist. I have clients whose ex “always handled that stuff”. I have clients who really just think it’s boring but have finally accepted that it’s part of life so SOMEBODY (but not them!) needs to do it.

The Screw-up Client generally comes to me a bit apprehensively. He doesn’t like accountants (tough but fair). He’s had an accountant that either talked above his head or talked down to him and he’s not sure which was worse. He’s been invested in “if I ignore this I don’t have to deal with it” for so long the whole thing makes him anxious. He’s afraid I’ll be unapproachable. He’s afraid I won’t “get” what he’s about or what he needs. He’s afraid I’ll try to sell him a bunch of services he can’t afford. He’s afraid I’ll judge him when I hear just how much of a Screw-up he is.

Well, here’s what really happens.

We sit down (or if you’re remote we talk on the phone or do a Google Hangout) and I type notes while you talk because I can’t read my own handwriting. Don’t let it make you nervous. I ask what your current situation is. You tell me something you think is shameful (“My business is entirely cash and I want to go legit”, “I don’t even know the last year I filed a tax return”, “Somebody mentioned sales tax to me last week and I have literally never even thought about that”, “I’ve been putting IRS letters in a stack on my kitchen table, but they froze my bank account today so I probably need to talk to someone”). If you laugh, I laugh. If you’re stoic, I’m calm and unfazed. You cope how you cope and I’m adaptable. Then I outline an action plan, quote you an hourly rate, request that you sign a (tax-only) power of attorney, and ask how much you want to be kept in the loop on what I’m doing. I’ll copy you on every email I send, or I’ll send you a final answer and the bill if that’s possible.

That’s it. For you. As for me, I get to have FUN. I love solving a problem. I love a unique situation. I love doing something that I know I do at least as well as anybody around.

I left my job earlier this year for many reasons, but chief among them was the feeling that I should be doing something to help people. At the time, I was certain that meant a career change, but it turns out that isn’t the case. I’m not changing the world, but I’m changing the lives of individual people, and that works too.

Reach out if you’re ready to be a Reformed Screw-up Client.

Dawn Howard
Estimated Payments Due June 15

Hi everybody. Getting this blog properly up and running is very much on my to-do list, but for now I just wanted to check in and remind y'all that estimated payments for Q2 2017 are due on June 15.

Estimated payments are one of those things busy people tend to forget but missing them is the best way to end up with a penalty, so don't do it! You can even make them online at https://www.irs.gov/payments.

If you need help with estimated payments, get in touch.

Dawn Howard
Should Your Business Be Filing a Property Tax Return?

One of the more common things I see when I pick up a new small business client who has been doing their own taxes is failure to file a property tax return.

In Kentucky, if you have tangible property that you are using in your business - anything from desks to copiers to artwork - you have a filing obligation. Form 62A500 is how this is reported and it's a bit confusing all around.

First, it's called a "Tangible Personal Property Tax Return". Personal? I thought we were talking about business property. Well, that's how a regular person would react to that, but in the tax world, there are only two kinds of tangible property - personal and real. Real property is buildings and land. You're familiar with that because the assessment comes automatically from your county PVA. Personal property is all the rest. (Your "personal property" in the common use sense of the term isn't covered by this at all.)

Second, it's a 2017 form. Aren't we filing our 2016 taxes right now? We are, but (for reasons unknown to me) property is assessed on January 1st instead of December 31st. So we are currently in the 2017 filing season. 

All of this to say, your return is due in Kentucky on May 15, 2017. No tax is paid with the return. You'll receive an assessment later. 

If you'd like to know more about personal property tax, Get In Touch.

Dawn Howard