by: Tom Andrws, CPA
Traditionally the Internal Revenue Service begins accepting tax returns for processing in mid-January however it has recently been announced that the IRS will be delaying the acceptance of tax returns until January 31st. The new start date is being attributed to the government shutdown which has already added additional stress to an already understaffed Internal Revenue Service. While some taxpayers may welcome a later start date many taxpayers will be frustrated as they will want to file their tax returns as soon as possible.
Taxpayers attempting to purchase real estate is a perfect example of why a taxpayer would want to file early. Over the past few years I have notice many crewmembers positioning themselves to purchase real estate. One of the conditions underwriters require when applying for a loan is that the potential borrower provide a current year tax return. Unfortunately a 2012 tax return is already a year old and not considered “current” enough for many lenders hence the lender will push the borrower to file their tax return as soon as possible so they have current information. Too make matters more complicated many lenders will not consider the tax return filed until the IRS has accepted and processed the return, the processing of a tax return may take between one to eight weeks depending on whether or not the tax return was paper filed or electronically file. Now that the IRS has delayed the processing of tax returns by almost two weeks a return filed on January 31st may not be considered “processed” until early to late February. Yacht crewmembers are particularly more vulnerable to these date changes because the time spent attending to personal issues is sometimes scheduled months ahead of time. A crewmember may be traveling for extended periods of time and may allocate a few weeks while they are in town to meet with real estate agents and mortgage brokers.
While filing your tax return early may be the goal of many tax payers it is not always the most efficient course of action. Many yacht crewmembers have unique tax situations that may prohibit early filing, for example if you have stock sales, K-1’s, retirement distributions, interest, dividends etc. this information is reported on third party documentation that is sometimes not received until February or March. If you were to file a tax return based on partial information you will probably receive a notice from the IRS inquiring about missing information, this may lead to filing an amended tax return which many take six months to process.
In conclusion I would encourage tax payers to carefully review their previous year tax return and be aware of any current year activity to insure all documentation is gathered before filing your 2013 tax return.