I Can’t File My Taxes Early Even if I Want To. Here’s Why
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Tax returns for 2023 are due on April 15 this year. But seeing as how the IRS opened up the tax season on Jan. 29, at this point, a lot of people have already managed to submit their 2023 tax returns.
There’s a big benefit to filing your taxes well ahead of the April 15 deadline. If you’re due a refund from the IRS, the sooner you submit your return, the sooner that money can hit your bank account. And if you find out that you owe money to the IRS, by filing taxes early, you’ll have more time to come up with a plan to scrounge up that cash rather than risk accruing interest and penalties.
In theory, I’d like to be someone who files their taxes early — namely, to get an unpleasant and time-consuming task over with. In reality, though, because of certain investments I hold, filing my taxes early is basically a no-go.
To be clear, this doesn’t mean I can’t get my return in before April 15. But filing in, say, late February, early March, or even mid-March just isn’t possible. Here’s why.
When you don’t get your paperwork in time
Many people get all of their tax paperwork by the end of January. But because of certain investments I hold, some of my paperwork doesn’t come in until we’re well into March. And that takes an early filing off the table.
I hold certain investments — namely, real estate investment trusts (REITs) that are not publicly traded — that are required to issue shareholders a Schedule K-1 each year. This is a form I need to file my taxes.
Entities that are subject to Schedule K-1 reporting are generally required to issue those forms by March 15. But sometimes, they get leeway beyond that date or are just plain late.
In my experience, I often find that my K-1s don’t arrive until late March. And it’s only once I have those forms that I can sit down with my accountant and review my overall earnings and income picture.
Usually, by the time that happens, it’s already April. So while I’m not necessarily filing my tax return the day before the IRS deadline, it’s also fair to say that I’m not filing my taxes early.
A timeline that isn’t a problem for me
If I were someone who commonly got a tax refund, then having to file my taxes at basically the last minute would annoy me, as it would mean delaying my money. But as a self-employed small business owner, I’m someone who pretty much never gets a refund. Because of this, it’s not the biggest deal to file my tax return late in the season.
Also, I’m no stranger to owing the IRS money in April. So what I do during the year is set aside funds for when I need to write that check. Because of this, I’m not left scrambling when I file my taxes, say, six days before the deadline and have limited time to come up with the money.
If you’re someone who usually gets a refund, though, and you’re someone who likes to file taxes early, then you’ll need to be mindful of the investments you choose. Some of them — and their associated paperwork — could leave you with no choice but to basically file your taxes at the last minute year after year.
If you’re not sure whether any of your investments will subject you to K-1 reporting, sit down with an accountant to review your portfolio. That way, there won’t be any surprises.
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