With tax laws growing only more complex and an IRS logjam of tens of millions of still-unprocessed returns, tax planners are saying that this may be a good year for their clients to consider filing for a tax extension.

New reporting requirements add to the problem, “whether it’s providing more information on cryptocurrency or more basic information for owners of pass-through entities, the requirements of the preparer to gather and take responsibility for data that hasn’t previously been on our plates have continued to increase,” said David Levi, senior managing director at CBIZ MHM in Minneapolis.

“We’re trying to explain several things, including getting prepared as early as possible, while at the same time letting them know that K-1s may be later as complexity and information disclosure increases while staffing has become more problematic,” Levi said.

“As one can imagine,” he added, “clients aren’t excited about the additional fees incurred to put together this information.”

“If you have the data to file on time, you should do so,” Levi said, “but for many the reality of their finances makes it more difficult. If you have complex issues, you don’t want to jam your tax returns into the wee hours of the night in the second week of April.”

A tax filing extension gives clients until Oct. 15 to file, though not to pay owed taxes, which remain due by this year’s tax day of April 18.

“Extensions will be more common this year, we think, particularly if the April deadline is not extended this year, as it was during the past two filing seasons,” said Benjamin Bohlmann, a CPA and partner in the Miami office of Friedman LLP. “As we’ve seen in the past, sometimes brokerage 1099s are corrected and may not arrive until March. And if someone has already filed, that would necessitate an amended return.”

Additional time to file can be good and bad for clients, partially because of the complexity of returns.

“Filing as soon as possible is not ideal, as it increases the likelihood of needing to file an amended return,” said Glen Birnbaum, tax partner at Sikich in Peoria, Ill. “The best approach is to take time to consider the options for those taxpayers who can still adjust taxable income for 2021.”

“We encourage all of our clients to compile their tax information as it comes in and provide it to their tax preparer as soon as possible so they can beat the rush, particularly because there is no extended tax deadline this year for most taxpayers” because of the pandemic, said Derek Wilton, senior advisor at Moneta in St. Louis. “If you’re in a situation where you receive and are able to compile all of your tax information by early to mid-February, filing ASAP is going to be your best bet.”

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