Even if you want to file your taxes early, you can’t. Here’s why

The 2023 tax return deadline is April 15 of this year. But with the IRS starting tax filing season on January 29th, many people have already filed their 2023 tax returns.

There is a big advantage to filing your taxes well in advance of the April 15 deadline. If you need a refund from the IRS, the sooner you file your return, the sooner the money will be in your bank account. And once you know you owe taxes to the IRS, you’ll have more time to come up with a plan to save cash rather than risking interest and penalties by filing your taxes early.

In theory, I’d like to be the person who files their taxes early – the person who gets that unpleasant, time-consuming task done. But in reality, certain investments I have make it basically impossible for me to file my taxes early.

To be clear, this doesn’t mean you can’t file your return before April 15th. However, it is not possible to submit in late February, early March, or even mid-March. Here’s why:

When documents are not received on time

Many people receive all their tax documents by the end of January. However, due to certain investments I have, some of the paperwork won’t be received until March. And that requires getting paperwork off the table early.

I hold certain investments, such as real estate investment trusts (REITs) that are not publicly traded, that require me to issue a Schedule K-1 to shareholders each year. This is the form you need to file your taxes.

Businesses reporting Schedule K-1 generally must issue the form by March 15. However, sometimes there is leeway beyond that date, or it may be delayed altogether.

In my experience, K-1s often don’t arrive until late March. And only after you receive the forms can you sit down with your accountant to review your overall income and income situation.

Usually by that time it is already April. So, while you don’t necessarily have to file your tax return the day before the IRS deadline, it’s also fair to say that you don’t file your taxes early.

The timeline is not a problem for me.

If I were someone who often gets tax refunds, I would get annoyed because basically having to file my taxes at the last minute means delaying my money. However, as a self-employed small business owner, I almost never You will receive a refund. Because of this, filing your tax return late in the season isn’t the biggest problem.

Also, I’m no stranger to having to pay the IRS back in April. So what I do throughout the year is I set aside funds for when I need to write a check. This prevents you from panicking because you have limited time to save money when you file your taxes six days before the due date.

But if you’re someone who regularly gets refunds and likes to file your taxes early, you should be careful about your investment choices. Some of that, and the paperwork involved, could basically force you to file your taxes at the last minute every year.

If you are not sure whether your investments are eligible for K-1 reporting, review your portfolio with your accountant. That way there will be no surprises.

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