Don't Mess With Taxes

Taking things a bit more slowly often is a good idea. For many, that approach also applies when it comes to filing their annual tax return. (Photo by Kay Bell)

While millions of taxpayers are eager each January to get their returns to the Internal Revenue Service, there just as many who want to take their time.

Some are just natural procrastinators. They wait until the last minute to finish every task.

But when it comes to tax filing, there actually are some good reasons to not be in such a hurry. Here are seven.

1. To see if Congress will act. We made it through December 2023 without any end-of-year Congressional futzing around with the Internal Revenue Code. Although some tax breaks expired, we at least got our holiday time and the knowledge that the tax laws for 2023 were, for better or worse, set.

Then came January. And the start of tax season 2024. And Congress deciding it wants to make tax law changes, some of them retroactive to the 2023 tax year. So much for tax planning.

The tax law changes getting the most attention are enhancements to the Child Tax Credit and several business deductions. will they pass?

Yes. No. Maybe. Who knows? The correct answer is the question, since the prospects of clearing the House seem to change hourly.

But just in case, if you haven't filed your 2023 Form 1040 yet, and one or more of the provisions in the bill might affect last year's tax liability, you might want to wait a bit longer.

IRS Commissioner Danny Werfel says that if the tax bill does become law, his agency will be able to make changes to already filed returns that are affected. Ohhh-kay. 😬

I have to agree with TaxTwitter pal CPA Joe Kristan's analysis, which also applies to proposed retroactive individual tax law changes: "I have grave doubts that the IRS will properly compute research expense, bonus depreciation, and Sec. 163(j) interest on its own. The changes in the bill would generally result in lower taxes for business. As chances for passage seem to be improving, it's hard to justify filing in a hurry with a balance due in hopes IRS will recompute taxes and issue timely refunds if passage occurs."

So, despite Werfel's recommendation that taxpayers not wait on Congress, putting the brakes on filing right now could be the best move. A least for the immediate tax season future.

2. To make sure you have all your tax statements. If the only data you need to file is from your job's Form W-2, then you probably can (and should) file as soon as you can. Many folks, however, get a lot more tax statements than just a W-2. These documents not only have data necessary to properly fill out a tax return, but they also are copied to the IRS.

Some issuers of these so-called third-party reporting statements are very efficient and get them out early each January. Most of them also are available electronically. You're likely to get an email notice that you can go to the issuer's website and download your tax information you need to file your return.

But issuers also are procrastinators. They wait until the Jan. 31 deadline they're allowed to send tax documents. And a few still snail mail them. In these cases, be patient.

You'll need even more patience if you get any of the tax documents that aren't on the Jan. 31 delivery schedule. In fact, these usually aren't issued until well into the filing season or even beyond, such as the K-1 form issued for partnerships, LLCs, and S corporations. They don't have to be sent until March 15. If you need a K-1 to file, there's no way to do so until you get it.

Filing without the correct information means delayed processing, slowed refunds, an amended Form 1040-X return filing, and dealing with the IRS much more than you ever wanted.

3. To ensure you have all other tax information. Formal tax statements that you need to file your taxes are issued in many cases, but not all. Sometimes in order to report your accurate earnings amounts, you'll need to check all your financial records, such as bank accounts or online payment apps.

For example, you got a 1099-NEC forms for the contract work you picked up to supplement your main wages. These forms were sent to you because you earned $600 or more.

But some of your other earnings were less than the statement triggering threshold. A check of your bank statements, for example, could job your memory of that $599 your neighbor paid you for the new shelf you handmade to fit the awkward space in his garage.

Also double check that you have all the details on potential tax breaks, such as medical expenses if you're still itemizing and claiming these costs. Or the expenses you paid for the care of your young children so you could work. You need these amounts — as well as the caregiver's tax identification number — to claim the child and dependent care credit.

Again, if you find such income or expenses after you file, well, you know the amended return drill.

4. To sort through your personal tax complexities. If you're one of the taxpayers who gets lots of tax statements, that's an indication your return is more complex. And the more complicated your taxes are, the greater the chances that you'll screw them up if you're in a hurry to file.

If you have more involved taxes — such as side gigs or your own business or investments or a big, messy family — you'll probably need time to sort through all the related tax implications.

These complexities likely will require some time to work through. They also mean that while it's a good idea to start your return early, then take your time reviewing your tax choices and carefully reviewing your 1040 and associated material before sending it to the IRS.

5. To allow you to find a tax professional. The tax complexities you encountered in #4 also might convince you that you need more help than a tax software package can provide. In this case, start your tax professional search now, but realize that it's a process that shouldn't be taken lightly or done quickly. You'll need to determine the type of tax pro that best fits your needs. Then you must thoroughly check out potential tax preparer candidates. Then when finally do hire a reputable tax preparer, since tax season is underway you're going to the end of the line. That, plus your more complicated return, means your return definitely will be filed later, and probably extended.

6. To ensure you understand your return. I know, most of us just want the filing over with ASAP. I get it. But it's important to know what's on your return, whether you fill it out yourself or it's done by a professional.

When each of us signs our 1040, either pen-to-paper form or with an electronic signature, we are attesting to its accuracy, placing any legal ramification for the return's entries squarely on you, the taxpayer. When you sign a joint return, the responsibility is on both of you, even when one spouse did the actual filling out of the forms.

So if you have questions about why a deduction was or wasn't claimed or how come your tax bill was bigger this year than last, ask. Ask your tax software's help option if that's how you're doing your taxes. Ask your tax-preparing spouse. Ask the tax professional you hired. And ask and ask and ask until it's totally clear.

7. To get all your returns right the first time. All of this post's previous filing procrastination situations ultimately lead to one conclusion. Once is enough when it comes to doing your taxes.

If you're too eager to file your return, you might have to do it again because in your rush you didn't include necessary information or made a mistake. By letting your original federal tax return sit there a bit before you file it, you'll give yourself time to take another look. A pause and follow-up with fresh eyes often make a mistake suddenly seem amazing obvious.

If you also file states taxes, which most U.S. taxpayers do, the potential for follow-up corrections is doubled. Most states rely on your federal tax return entries. When those are wrong, so is your state filing, meaning you'll have to re-do it, too.

So take all the time you need to file completely and correctly. That's when you have all the info you need. Or when your confident you understand what's on your 1040. Or when you can get a spot on your tax pro's schedule.

And if that right tax filing time is later, that's fine.

You also might find these items of interest:

• 9 ways to make tax filing easier
• 8 reasons to file your tax return early 
• Before you file your tax return, answer these checklist questions

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