WorldWide Drilling Resource

Drilling Into Money Not Boring by Mark E. Battersby Correcting Business Boo-Boos Everyone knows mistakes are in- evitable. Fortunately, a combination of unique tax write-offs and strategies can help any drilling business avoid potential pitfalls and make many of the changes necessary to increase profitability. Correcting or amending a tax return because of errors, omissions, mistakes, overlooked deductions, or changes in our tax laws is encouraged by the Internal Revenue Service (IRS). Although it should come as no surprise few taxpayers amend their returns to report additional income, some changes can mean substantial tax savings. Generally, a drilling operation - or its owner - can change their mind about previously reported income and deductions within three years from the time the return was filed, or within two years from the time the tax was fully paid, whichever is later. If the refund claim involves the deductibility of bad debts or worthless securities, the period is seven years. There are also other changes which should or must be made, such as with estimated tax bills. After all, no one wants to overpay their estimated tax installments - and underpayments mean substantial penalties. Other areas where change might prove beneficial is in the accounting method employed for financial statements or tax purposes. Both cash accounting and accrual accounting have their pros and cons. The basic difference between cash and accrual methods of accounting lies in the timing of revenues and expenses. Unfortunately, the approval of the IRS is required before changing the method - even where the change is demanded by the IRS. Changing circumstances, changes in the tax laws, and even the success of the drilling operation might prompt a reassess- ment of the form the business operates under. Not only will the decision to change the business’ entity have an impact on how much is paid in taxes, it will also affect the amount of paperwork required for the business, the personal liability faced by the principals and, especially important in today’s economy, the operation’s ability to raise money. Making many of these and other changes may require the services of a professional, perhaps even one more experienced than the drilling entity’s current advisers. Fortunately, there are a variety of skilled professionals just waiting to serve you and your business. It is not “tacky” to discuss fees before engaging the services of a professional, although money should not be the sole criteria for selecting the professional. Obviously, finding a professional at an affordable price is a process which should begin immediately. Mark Mark E. Battersby may be contacted via e-mail to michele@ worldwidedrillingresource.com 0,2+ 675;,4 -57 5;,7 ',(78 /558, -753 +0--,7,49 35+,28 95 -09 >5:7 4,,+8 "(4.04. -753 36 95 36 4*2:+,8 %,/0*2, :36 #9(7904. (99,7> /(7.04. (4+ (4+ % 95 65<,7 &07,-,,+,78 0. (7708 "5(+ ,74+(2, ,< '571 $,2 (= &,) 809, <<< .,9,* *53 3(02 8(2,8 .,9,* *53 ',(78 5- =6,70,4*, 3(1, 9/08 204, 5- &,2+,78 (4 :43(9*/,+ !:(209> 75+:*9 04 95+(>?8 3(71,9 690548 04*2:+, 49,74(2 7,88:7, 536,48(904. 25< 549752 67,;,4904. (**0+,49(2 5;,786,,+ +(3(., 95 9/, &,2+,7 %,/0*2, :36 #9(7904. %5298 ( ,9,* ,=*2:80;, (99,7> /(7.04. %5298 (4+ % 95 65<,7 >5:7 0. :4 &07,-,,+ 589 536(*9 >+7(:20* &,2+,7 54 (71,9 (049,4(4*, 7,, ,80.4 0./9,89 >+7(:20* &,2+,7 54 (71,9 23 WorldWide Drilling Resource ® MAY 2016 Drilling industry news, products, and services are only a click away at worldwidedrillingresource.com