How long should you wait before filing taxes? Surprise! Later can sometimes be better
Tax preparers and the IRS encourage you to file taxes early. But there are times you may want to consider filing later, closer to the tax deadline, or even request an extension.
What are those times and how would you know if you should?
Some are easy calls, like if you had an account at the bankrupt, scandal-ridden cryptocurrency exchange and crypto hedge fund FTX. With alleged wide-reaching fraud and more than a million creditors and investors, it might take a while to untangle the schemes and see if anything is recoverable and know how to handle the outcome on your tax return.
However, there are other good reasons to wait on your tax return, including making sure you have all the proper tax documents, accountants say.
It’s true if your income streams are few and straightforward like work or savings accounts, you’ll likely be able to file your taxes right away. Those forms must all be sent to you by the end of January and are usually correct.
But it may surprise you, not all tax forms are required by law to get to you by Jan. 31, and that could hold up your tax filing.
“Sometimes, it won’t even be a discussion of whether to file on time or not,” said Brian Schultz, wealth management partner at certified public accounting firm Plante Moran. “It’ll just be impossible to file on time.”
Key information:Are you ready to file your taxes? Here’s everything you need to know to file taxes in 2023.
What tax forms should you consider waiting for?
Most forms that may come later result from investments. They include:
- K-1s for partners, shareholders, and such showing their share of a business income that must be reported on their personal tax returns. The IRS says they’re due on the 15th day of the third month after the end of the partnership’s tax year, which is generally March 15 but can be extended to Sept. 15 if it’s a calendar year.
- 1099-Bs are consolidated tax returns from a brokerage account, summarizing capital gains, foreign dividends and more.They’re mailed by Feb. 15, but corrections are often issued and can come out as late as May, past the April 18 tax deadline, said Schultz of Plante Moran.
“You might want to wait for those 1099-Bs because they can sometimes have a significant impact on your tax return,” said Rob Burnette, chief executive and investment adviser representative at Outlook Financial Center.
Can I claim FTX loss on taxes?
Since the government filed criminal charges against FTX founder Sam Bankman-Fried and some fellow executives, the more than one million taxpayers in limbo might be able to use the IRS theft loss rule that the IRS clarified when financier Bernie Madoff masterminded the largest Ponzi scheme in history. The scheme, worth about $64.8 billion, cheated tens of thousands of people. The theft loss rule allows you to claim the loss as an itemized deduction if the theft was considered illegal in the state where it occurred and it was done with criminal intent.
“Charging FTX in a criminal fraud suit may have helped taxpayers,” said Ryan Losi, executive vice president at certified public accounting firm PIASCIK. “That doesn’t mean the charges will stick or that outcome will prevail, but it gives taxpayers a leg to stand on and a potential option if they want to explore it” and file a tax return.
Ultimately, though, Losi says taxpayers may just want to file an extension, if they can, to get more clarity from the IRS.
It may be less hassle to file an extension now than file an amended tax form later, accountants say. Plus, amended returns have “a higher audit rate,” warns Burnette. “When you amend a return, the IRS won’t just look at the reason the return was amended but look at the entire return.”
Filing your taxes on your own? Here is the best tax software
Are there other reasons not to file early?
- If someone died and the trust or estate made a distribution to you, you’re not likely to get the information you need for your taxes until too close to Tax Day. Estates and trusts need extra time to calculate the tax information as they apply to each beneficiary, so calendar year estates and trusts have until April 15 each year to distribute the K-1 tax form to you. (For fiscal year estates and trusts, the K-1 tax form deadline is the 15th day of the fourth month following the close of the estate or trust tax year.)
Further, estates and trusts can file for a five-month extension, which would also extend the time to get the K-1 to you.
- If you’re self-employed or own a small business, you can give yourself more time to fund your retirement account.
Individual Retirement Account contributions must be made by the tax deadline, which is April 18 this year, to count as a deduction for 2022 taxes. However, if you contribute to a Simplified Employee Pension Individual Retirement Arrangement, or SEP IRA, you can file for a tax filing extension to Oct. 16, which will also extend the time you can contribute for a 2022 deduction, giving you access to that money for another six months, Schultz says.
Mega tax return:What we know about the 6,000 pages of Trump tax returns, Republican response and more: recap
Tax leak:Billionaire hedge fund manager Ken Griffin sues IRS after tax details leaked to ProPublica
More of your 2022 tax season questions answered
- Tax season 2023 officially started: Here are key deadlines to keep in mind
- File your taxes early for a chance to double your refund money with Jackson Hewitt
- 1099, W-4, W-2, W-9, 1040: What are these forms used for when filing your taxes?
- What are the 2022 US federal tax brackets? What are the new 2023 tax brackets? Answers here
- 2023 tax season guide for new parents: What to know about the Child Tax Credit, EITC and more
- IRS may owe you from 2020 taxes. Here’s why and what you need to do to find out if you’re owed
- What is OASDI tax on my paycheck? Here’s why you and your employer pay this federal tax
- Do you have to report crypto on taxes? Yes. Here’s what you should know about form 8949
- What is a 1098-E form? What you need to know about the student loan interest statement
- Tax season 2023: What exactly is the mileage rate? There’s more than one.
- Is it better to pay someone to do your taxes or do them yourself? We’ll help you decide.
- What is income tax? What to know about how it works, different types and more
- Is Social Security income taxable by the IRS? Here’s what you might owe on your benefits
- Companies can deduct full cost of business meals on 2022 tax returns
- Who has to file a tax return: It’s not necessary for everyone. Here are the rules.
- What is capital gains tax in simple terms? A guide to 2023 rates, long-term vs. short-term
- Best way to receive your 2023 tax refund? IRS says direct deposit. Here’s how to do it.
- What is FICA? How much you contribute to federal payroll taxes.
- How much is the Child Tax Credit for 2023? Here’s what you need to know about qualifying.
Source By: usatoday