Westend61 | Westend61 | Getty Images
A key deadline is around the corner for millions of procrastinating taxpayers.
About 12 million people took an extension to file their 2019 tax returns, according to data from the IRS. That’s down from the 15 million extension requests the agency received last year.
The drop-dead date to get your paperwork to the taxman is Oct. 15, but 2019 taxes owed should have been paid in full by July 15 — the Treasury Department’s new Tax Day this year due to Covid-19.
Failure to file on time will cost you. Late filers face a penalty of 5% of the unpaid tax they still owe, and it’s charged for each month or part of a month the return is late.
People who are due a refund can’t collect it until they’ve submitted a return for that year.
Even with extra time to chase down paperwork, tax professionals still anticipate a sprint to the finish.
“I think a lot of practitioners are challenged by the fact that information from all sources is coming in late,” said Cari Weston, CPA and director of tax practice and ethics for the American Institute of CPAs. “It’s delaying their ability to manage the workload as they have in the past.”
Covid-19 slump
Some taxpayers can’t help filing late.
“The extensions I had this year were people who had accounting and bookkeeping issues and couldn’t file on time because they needed to get those issues resolved for their small businesses,” said Nayo Carter-Gray, enrolled agent and CEO at 1st Step Accounting in Towson, Maryland.
Individuals with stakes in partnerships also tend to take longer to file. That’s because they’re waiting for additional documents — including Schedule K-1 — from those partnerships.
“Every layer of documentation seemed a little more cumbersome for clients, and they don’t know where they stand by July 15,” said Brian Streig, CPA and tax director at Calhoun Thomson and Matza in Austin, Texas.
All of those issues were further compounded by the fact that taxpayers had to familiarize themselves with uploading sensitive documents to tax professionals’ secure online portals and grapple with the new reality of the pandemic.
“I think a lot of practitioners are challenged by the fact that information from all sources is coming in late,” said Weston. “It’s delaying their ability to manage the workload as they have in the past.”
Further, there was never a slowdown in activity for tax professionals.
Many are keeping up with small-business aid programs, including the Paycheck Protection Program, changes to unemployment insurance and the payroll tax holiday.
“Tax professionals are more tired than they normally would be,” said Weston.
“You had a break in the summer in prior years and a chance to slow down, but they’ve been going from the second week in February until now with little break in between,” she said.
Speed up the process
Getty Images
Do yourself and your tax professional a favor, and don’t show up on Oct. 15 with a box of receipts.
Here are a few steps to make the process a little more streamlined.
Dig up last year’s return and do a side-by-side. Whether it’s a mortgage statement or receipts detailing business expenses, missing key documents will slow down the filing process. Further, you could miss out on valuable tax deductions.
Find your return from the prior year and review it to make sure you’re not missing any documents as you prepare this year’s packet. Scan everything and deliver it securely to your tax pro’s portal, if possible.
More from Advisor Insight:
Target-date funds are getting more personal
Eight costly retirement mistakes to avoid
Make sure you don’t outlive your money
“If you don’t have almost all of those documents now, many of them should be available online,” said Bill Smith, managing director for CBIZ MHM’s national tax office. “This gets you on track, knowing what it’ll be like this year.”
Still owe the tax man? Make electronic payments: The IRS wound up with a hefty backlog of mail during filing season. If you owe money, don’t take your chances by cutting a check and tossing it into a mailbox.
“Pay it electronically,” said Streig. “There’s no reason to mail them a check anymore.”
Got questions? Take a moment to write them down and send them in one batch via email, rather than calling the office multiple times. “We can read them and answer when we have breaks in our schedule,” said Carter-Gray.