You are urged to submit your taxes early by both tax preparers and the Internal Revenue Service or IRS. Yet, there are instances where you might want to think about submitting a tax return later, or earlier the tax filing deadline, or even requesting an extension.
So you got your W-2 and a few other statements in February and thought, Meh, I’ll do my taxes later. Or maybe you put off doing your taxes because you were missing an important document. March flew by, and before you knew it, Tax Day was looming. (Photo via https://www.ramseysolutions.com/taxes/tax-extension)
What are those circumstances, and how would you determine if you should?
Some decisions are simple, such as if you had an account with the defunct, scandal-plagued cryptocurrency exchange and hedge fund FTX. It might take some time to sort through the schemes, determine whether anything is recovered, and know how to manage the results on your tax return given the alleged widespread fraud and the more than a million debtors and investors.
Aside from ensuring you have all the necessary tax documentation, there are other valid reasons to delay filing your tax return, according to accountants.
It’s true that if you have a few simple sources of income, such as a job or savings, you can probably submit your taxes right away. All of those forms, which must be submitted to you by the end of January, are typically accurate.
You might be surprised to learn that not all tax forms must be delivered to you by January 31. This could cause a delay in submitting your taxes.
Brian Schultz, a wealth management partner at the CPA firm Plante Moran, stated that “sometimes, there won’t even be a conversation about whether to file on time or not.” To file on time will just be impossible.
With just over a week of trading left, 2022 is shaping up to be a gnarly year for investors. (Photo by Getty Image)
Which tax documents should you consider delaying?
The majority of possible future shapes are a result of investments. They consist of:
K-1s for shareholders, partners, and other similar parties detailing their proportionate share of business revenue is required to be declared on their personal tax returns. According to the IRS, they must be submitted by the 15th day of the third month following the partnership’s tax year’s end, which is typically March 15 but may be extended to September 15 if the year is a calendar one.
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Combined tax reports from a brokerage account, 1099-Bs include a summary of capital gains, overseas dividends, and other information. The deadline for filing taxes is April 18; however, they are usually corrected and mailed by February 15 but may not arrive until May, according to Schultz of Plante Moran.
Rob Burnette, CEO and investment adviser representative at Outlook Financial Center advised clients to wait for their 1099-Bs because they occasionally affect tax returns significantly.
Can I deduct FTX loss from my taxes?
The more than a million taxpayers in limbo may be able to apply the IRS theft loss rule after the government brought criminal charges against FTX founder Sam Bankman-Fried and several other officials when financier Bernie Madoff orchestrated the biggest Ponzi scam in history. The $64.8 billion swindle defrauded tens of thousands of people. If the theft was done with criminal intent and was deemed illegal in the state where it took place, you may be able to claim the loss as an itemized deduction under the theft loss rule.
A federal judge has unsealed the names of two anonymous sponsors who were guaranteeing FTX founder Sam Bankman-Fried’s $250 million bond. (Photo by Andrew Kelly/Reuters)
According to Ryan Losi, executive vice president of the certified public accounting firm PIASCIK, “charging FTX in a criminal fraud complaint may have helped taxpayers.” “It doesn’t mean the charges will stick or the outcome will prevail, but it gives taxpayers a leg up and a viable alternative if they want to examine it,” and submit a tax return.
In the end, though, Losi claims that individuals might simply want to submit an extension, if they can, to obtain additional clarification from the IRS.
According to accountants, it can be less work to file an extension now rather than a later updated tax return. Also, according to Burnette, modified returns have “a greater audit rate.” “When you update a return, the IRS will review the whole return, not simply the reason the return was amended.”
A worsening macroeconomic climate and the collapse of industry giants like FTX and Terra have weighed on bitcoin’s price this year. STR | Nurphoto via Getty Images
Exist any other justifications for delaying filing?
You are unlikely to receive the information you require for your taxes until too close to Tax Day if someone passed away and the trust or estate issued a distribution to you. Estates and trusts have until April 15 of each year to distribute the K-1 tax form to you because they require extra time to calculate the tax information as it pertains to each beneficiary. The deadline for submitting K-1 tax forms for fiscal year estates and trusts is the 15th day of the fourth month after the end of the estate or trust tax year.
The time it takes for you to receive the K-1 can also be extended by five months if estates and trusts file for one.
Whether you’re self-employed or own a small business, you can give yourself additional time to fund your retirement account.
To qualify as a deduction for 2022 taxes, contributions to Individual Retirement Accounts must be paid by the deadline, which is April 18 this year. However, Schultz notes that if you make contributions to a Simplified Employee Pension Individual Retirement Arrangement, or SEP IRA, you are eligible to request a tax filing extension through October 16. This will extend the deadline for making contributions for a 2022 deduction and give you access to your money for an additional six months.
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