If there was ever a year in which you were likely to ask the IRS for more time, this is probably it.
Filers have four more weeks to submit their 2018 tax returns and sums owed to the IRS, as the April 15 deadline rapidly approaches.
This year is especially complicated, as it’s the first time taxpayers are filing under the Tax Cuts and Jobs Act.
This overhaul of the tax code went into effect in 2018. It roughly doubled the standard deduction to $12,000 for singles ($24,000 for married filing jointly), eliminated personal exemptions and placed new limits on itemized deductions.
If you’re overwhelmed by these changes and you have a complex return, it just might make sense to ask the IRS for an extension using Form 4868. This would give you until October 15 to submit your 2018 return.
This doesn’t buy you more time to pay your taxes, though. You must pay the IRS by April 15.
Even the pros anticipate more people will ask for additional time.
More than 4 out of 10 tax preparers polled by National Association of Enrolled Agents predict an increase in the number of requests for extensions. The group surveyed 924 of its members in February.
“The tax law is very confusing for a lot of people this year, and getting your mind to wrap around the new law might take more time,” said Mike Slack, lead tax research analyst at the Tax Institute at H&R Block.
Here are some of the taxpayers who are most likely to request additional time to submit their return.
If you’re a shareholder in an S-corporation, you won’t be able to submit your individual income tax return until you get all of the necessary paperwork from your business.
S-corporations and partnerships send their shareholders a Schedule K-1 every year, detailing their share of income, deductions and credits.
Businesses have until March 15 to share this information with owners and shareholders, which can slow things down for taxpayers.
“If I’m in several partnerships, I have to wait for all of those K-1s to come in before I file my return,” said Robert Kerr, enrolled agent and executive vice president at the National Association of Enrolled Agents.
Business owners with pass-through entities — including sole proprietorships, S-corporations and partnerships — may be entitled for a new 20 percent deduction on qualified business income on their 2018 tax return.
Entrepreneurs with taxable income below $157,500 if single or $315,000 if married and filing jointly may qualify.
Limitations to the tax break kick in over those taxable income thresholds.
For instance, “specified service trades or businesses,” including doctors, lawyers and accountants, can’t take the deduction at all if their taxable income exceeds $207,500 if single, or $415,000, if married.
The IRS has spent most of 2018 and part of January 2019 fine-tuning the deduction.
Even tax software providers have run into difficulty incorporating last-minute changes to the deduction, which led to some hiccups with accountants’ tax prep programs.
“You have taxpayers who are in more complex situations with the impact of all of these changes, and it’s causing practitioners to have to extend those returns more than they normally do,” said Edward Karl, CPA and vice president of taxation for the American Institute of CPAs.
Generally, fewer people are expected to itemize on their returns this year, now that the new tax law raised the standard deduction.
However, your accountant might still want to review your statements and receipts to make sure this is indeed the case for you. After all, there’s the possibility the total of your itemized deductions might exceed the $12,000 (single) or $24,000 (married and filing jointly) thresholds.
If you have to retrieve brokerage statements, acknowledgement letters from charities and more, then this might mean you’ll need more time to file.
“It wouldn’t shock me to hear that taxpayers thought they would take advantage of the higher-standard deduction,” said Karl. “The practitioner is asking for specific information about itemized deductions to make sure they’re not losing any advantages.”