25 FEBRUARY 2023 WorldWide Drilling Resource® Drilling Into Money Not Boring by Mark E. Battersby Last-Minute Tax Savings & Potential Pitfalls As the IRS’ (Internal Revenue Service’s) tax filing deadline approaches or has passed, it is not too late to plan to reap tax savings. Although many drilling contractors and their operations use a tax professional or tax preparation software, a number of strategies exist to correct anything overlooked. Extending Pain, but not the Payment: Any drilling professional who isn’t ready to file their tax returns can take extra time to gather records, search for other deductions, or seek professional advice if not already available. That’s right, anyone who has tried but can’t get their taxes prepared by the filing deadline, can file a Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, or use an online service. An I.O.U. to the IRS: Any drilling contractor unable to pay the full amount of their tax bill by the filing deadline may qualify for an online payment plan, possibly even an installment agreement. A drilling contractor can determine whether they qualify for an installment plan by attaching a Form 9465, Installment Agreement Request, to the front of their tax return. Changing Your Mind: If - or when - errors are discovered on an already filed tax return, it might have to be amended. Since Schedule C is used to report business taxes for a sole proprietorship or a single-member LLC, changes must first be made there before filing Form 1040X, Amended U.S. Individual Income Tax Return (or Form 1040, clearly marked as amended). Drilling businesses operating as an S Corporation make corrections using an amended Form 1120-S, U.S. Income Tax Return for an S Corporation, and checking Box H(4), Amended Return. Most partnerships or LLCs can amend their returns using Form 1065, U.S. Return of Partnership Income, although some partnerships and LLCs may, in some cases, have to use Form 1065X, Amended Return or Admini st rat i ve Adjustment Request (AAR), to amend the partnership. To amend a tax return for an incorporated business, Form 1120X, Amended U.S. Corporation Income Tax Return, must be completed and filed. Audit Proof Returns: The current scrutiny of those calling themselves “independent contractors” combined with continued attempts to label money-losing small businesses as “hobbies,” means reducing the risk of being selected for an audit is more important than ever, and don’t forget the plans to add 87,000 IRS employees. Regardless of how the return was prepared, there is still time to make changes, correct errors, and reap last-minute tax savings. Mark michele@ worldwidedrillingresource.com
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