A Conscious Delay: The Argument for Filing Tax Returns After March 15

Sue BerginSue Bergin

While few people would admit to being eager to file their tax returns, it is one of those chores that can weigh heavily on a person’s mind. Many Americans like to get their returns filed as quickly as possible so that they can check it off their list of things to do, and go on with their lives.

As recently reported on MainStreet.com, the two-week period leading up to the April 15th deadline is when the majority of Americans file their tax returns. The second most active two-week filing frenzy occurs between February 1 and February 14, with 20% of Americans choosing to file shortly after they receive all of their 1099’s.

Filing early may increase your chances of receiving a quick refund if you are so entitled. It may also lead to more work for you in the long run.

The IRS mandates that federal tax forms such as the Form 1099 series be postmarked by February 15, unless an extension is granted. While the likelihood of receiving amended forms is described on the front page of the Form 1099, many filers overlook it and are surprised and/or annoyed when their mailbox is stuffed with amendments.

The key to remember is that the fact that there is an amendment to the form 1099 does not mean that there was necessarily an error in calculation or reporting.

While every effort is made to provide clients with accurate 1099 forms, timing is sometimes an issue.

The brokerage and clearing firms that issue 1099’s are dependent upon mutual fund, Regulated Investment Companies (RIC), Real Estate Investment Trusts (REITs), and Unit Investment Trusts (UIT’s) issuers to provide accurate and final information early in January. These fund companies tend to analyze their portfolios throughout January into February and beyond, and may discover data that requires the 1099’s to be amended. Although rare, issuers have been known to revise dividend information one or two years after the payment date.

In addition, many companies take financial actions that the IRS may ask them to reclassify. This is common for REITs, UITs, mutual funds, RICs, and foreign-based securities. A reclassification does not indicate whether a security has merit; it means the IRS may classify something differently than the filing company.

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JTRRA) has caused a delay in income reallocation information from many, resulting in a spike in amended tax forms. Since there is currently no centralized source for this information, the brokerage industry continues to struggle with determining whether foreign securities meet the complex JGTRRA rules in order to pay qualified dividends. Therefore, receipt of late and revised information will again this year result in multiple changes to tax forms.

The bottom line is this: Wait until mid to late March to file your tax returns. This helps ensure that you have received all the amended 1099 forms that will be issued on your accounts.

This information represents our understanding of federal income tax laws and regulations, but does not constitute legal or tax advice. Please consult your tax advisor, attorney or financial professional for personalized assistance.

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