With everything that’s going on in the world, you may be wondering if you should wait to file your income tax return – maybe push it right up to the tax deadline.
After all, tax day for individuals was extended to May 17th in last year and this announcement wasn’t even made until March 17 (less than a month from the tax due date). Plus, a variety of economic situations are making times fairly tough for Americans once again in 2022. Inflation is at 40-year highs, and gas prices are draining consumer bank accounts in a hurry. The American economy is also seeing impacts caused by the war in Ukraine, including stock market turmoil.
Maybe you are hoping that the deadline for filing will be extended once again this year, or perhaps you owe money and don’t quite have the cash.
In either case, you can ask the Internal Revenue Service (IRS) for an extension of time to file your tax return if you absolutely need to. Taking this step will buy you several more months to get your return together with a final due date of October 15, 2022 if you’re eligible. This page on the IRS website explains exactly how to request an extension, as well as the forms required to make this request.
But, outside of emergency situations, does it make any sense to put off filing your tax return? Or, should you request an extension just in case? Most experts say “no,” although there are a handful of scenarios where it can pay to push it off.
When It Makes Sense To Wait
Financial planner Mike Hunsberger of Next Mission Financial Planning says there are two main scenarios where he might advise his clients to push off filing their taxes. The first one comes into play if clients owe additional money on their taxes this year.
“When that is the case, I suggest clients get their returns prepared but not submit them until the beginning of April,” he says.
The second time it makes sense to wait is when clients are determined to file as soon as humanly possible but they don’t quite have all of their documentation lined up. Hunsberger says that investment companies may not provide all required documents until mid-February and sometimes even later. This year was notable with a lot of investment firms delivering documents late.
“If some information is updated and the client has filed, they will need to go through the hassle of amending the return,” he says.
Financial planner Rianka R. Dorsainvil of Greenwood, a Black-founded digital banking platform for Black and Latino individuals and allies, points out that taxpayers who file for an extension need to be aware that they may become subject to additional interest and penalties if they wait to make payments. In other words, asking for an extension will buy you some time, but it won’t get you off the hook if you owe.
Another reason to wait is if you are on the fence about making last-minute financial moves.
“Business owners who are looking to save extra funds into investment vehicles like a SEP IRA might wish to hang onto the funds for just a bit longer before making the commitment,” says Dorsainvil.
Experts: Don’t Wait To File Your Taxes
While there are a handful of scenarios where waiting to file your taxes or asking for an extension can make sense, most experts agree that putting this task off is risky for more reasons than one.
For starters, financial advisor Rob Burnette of Outlook Financial Center in Troy, Ohio points out that filing early can reduce your exposure to someone fraudulently filing a return using your identity. Unfortunately, this type of fraud appears to be increasing over time, and is leading to billions of dollars in losses and misreported funds each year. Government statistics show that, for the 2020 fiscal year, the IRS investigated more than $2.3 billion in tax fraud claims.
If you wait to file after the fraud takes place, Burnette says your return will bounce electronically claiming you have already filed your return. From there, you will have to report the fraud to the IRS, supply documentation they require, and wait for the situation to be resolved.
“The fraud recovery process will eventually correct the situation, but it will significantly delay any refund expected,” he says.
CPA Shamisa Zvoma of Friedman LLP in New York City also points out the obvious — that waiting to file will inevitably delay having your return processed.
“The IRS is currently managing through a backlog of millions of returns, so if you are ready to file and especially if you are expecting a refund, the sooner you can get your return in line, the better,” says Zvoma.
The IRS says the average tax refund was more than $2,800 in 2021 for the 2020 tax year, although there is little data to show how much taxpayers will get back this year. Either way, filing your return now can help you get your refund sooner rather than later.
Will The IRS Extend The Tax Filing Deadline Again?
Experts also caution that taxpayers shouldn’t be optimistic when it comes to the IRS extending the filing date for all taxpayers again.
Hunsberger says he doesn’t have a crystal ball, but he tells his clients he wouldn’t bet on the deadline being extended.
“They are better off getting their taxes done now rather than putting their hope in a deadline extension,” he says. “That being said, I also advise clients that if they need to request an extension there is no issue with that other than they will need to pay taxes that are due by the filing deadline.”
Zvoma adds that the previous two years were an anomaly since we were dealing with the unprecedented upheaval of the Covid-19 shutdowns in 2020. In 2021, on the other hand, the American Rescue Plan Act was signed and passed in mid-March which impacted returns that were already in process.
“With the current landscape relatively settled compared to the previous two years, there appears to be little appetite from both the IRS and the professional community to move the tax deadline beyond April.”
Credit: www.forbes.com /