7 ms·

US tax return filings drop by nearly 1M, extension requests rise

67 points by MilnerRoute 2y ago

rogerrogerr 2y ago
I’m aware of some people who _always_ file an extension, but I haven’t pinned them down on why. Does anyone here file an extension in most/all years? Curious the reason.
- deleted 2y ago
  [deleted]
- milesvp 2y ago
  The way I understand it is that some people put off filing as long as possible because they get a better return on other investments. They’re willing to pay interest and other fees on their taxes in order to pay as late as possible. I haven’t looked into this personally because I tend to be risk averse enough to pay off relatively low interest rate loans, but I’ve heard at least one personal anecdote once removed to this effect.
  - yodsanklai 2y ago
    > because they get a better return on other investments let's hope their investment isn't the S&P500
- rootsudo 2y ago
  You can also file off season, get all deductions prepared, and put tax money in stocks and get a good return, usually. Last few years it was better to wait and then get pay lower. This year, maybe because the IRS is gutted the extensions wouldn’t be manually reviewed and a reduction in audits?
  - muro 2y ago
    > put tax money in stocks and get a good return except now, I guess...
    - rogerrogerr 2y ago
      Now might be a historically good time to do it… or historically bad. But it’s definitely historical.
- qaboutthat 2y ago
  I almost never get all my K-1s in order in time to file. So I basically always file for an extension.
  - afpx 2y ago
    Somehow all of my K-1s came early this year. It's the first time in 20 years that I didn't have to file an extension!
  - qwerpy 2y ago
    Adding on to this. Had one K-1 come late and my CPAs strongly advised filing for an extension to give them enough time to do thorough reviews. Didn’t save me any money, they still told me roughly how much to send to the IRS immediately.
- creer 2y ago
  Filing an extension doesn't change when income tax is due - but it changes the deadline for various things. Not just the 1040 filing deadline. Other procedures do not state their own deadline but rely of [the day your tax return is due, including extensions]. And there is no cost or penalty for filing the extension. So you file the extension and sort out the rest later. I have in the past filed the extension (to lock in the extension date), then just days later filed my 1040 - because for once it happened to be ready early. If you file your 1040 package without having filed for extension, you forfeit that later deadline for the rest.
- matttproud 2y ago
  If you are an American who lives abroad, you still need to file a tax return and possibly pay an obligation (two countries do citizenship based taxation: U.S. since Civil War and Eritrea). To properly file taxes when living abroad, you usually file a tax return in your country of domicile first and then transfer select facts to the American one for credits, deductions, and other offsets. All of this means minimally doing two tax filings. So: there you go. Heaven help you if you ever live in a place where the tax window is incompatible with the American ones.
  - noodlesUK 2y ago
    > Heaven help you if you ever live in a place where the tax window is incompatible with the American ones. The lack of matchup between the UK tax year from 6-Apr to 5-Apr against the US tax year of 1 Jan to 31 Dec is the bane of my existence.
    - CogitoCogito 2y ago
      How do you deal with this practically? If an American moved to the UK now (after April 6th of this year), how would you recommend dealing with it? Even if your answer is to get a tax accountant, do you recommend doing that early?
      - noodlesUK 2y ago
        Not an accountant, simply talking from my experience. If you're moving after April 6th you're probably going to be fine on the UK side. If you have any US income in the tax year you can claim either split year (on the foreign pages) or treaty residence (using hs302) in the US up until you move (assuming you file Self Assessment, most PAYE employees don't, though you strictly should given the foreign stuff). HMRC is way nicer and easier to work with than the IRS. It's a breath of fresh air. This is pretty simple, but UK accountants are also pretty cheap. The trouble is on the US side. If you're an American citizen you are liable to pay US taxes on all your income. If you're outside the US for most of the tax year, you can claim the FEIE and if you make less than ~$130,000, you have little else to do. If you're PAYE in the UK, you can claim the FTC on the cash basis in the US and you will probably also be fine. This is all fairly simple to do, and depending on your comfort levels you can probably do it in TaxAct or myExpatTaxes online. You also need to file FBARs and possibly 8938s every April. The trouble is if you are a sole trader or similar in the UK. This makes the FTC really hard. You will probably want a US accountant with knowledge of foreign tax if you are self-employed. Buzzacott is a firm I have seen do some good work for friends of mine with complex US and UK tax filings (though I have not personally used them). You can expect to pay thousands of dollars in tax prep fees every year if you use an accountant. This stuff seriously exceeds the knowledge of most US CPAs, so you will need someone who specifically advertises this. Also as an American you need to avoid pretty much all of the useful tax-planning tools here in the UK. You can't really have a S&S ISA, or any other kind of tax-advantaged account other than a workplace pension without it all going totally bananas on the US side. You also can't own a UK limited company (more than ~10%) without getting whacked with crazy 5471 reporting. Same applies to UK trusts, you can't touch them without 3520 reporting (even for trivial things like life insurance trusts here in the UK, and even certain pension products). Many banks and financial services providers won't touch Americans with a 10 foot pole. On the other hand you can potentially save a lot in taxes if you ever move back to the US if you've accumulated a lot of FTC carry forward. You can also probably pay a pretty minimal amount of US student loans if you're on IBR because the payments are based on your AGI which will be artificially low. The US needs to abolish citizenship based taxation and chill out on the reporting requirements (which are generally the worst part) for people who generally live abroad. However, I wouldn't hold my breath. Even though the current admin has said they'll get rid of it, I just don't see that there's much political capital to spend on this issue. There aren't that many Americans living abroad, and most Americans don't give a shit about this sort of thing.
- deleted 2y ago
  [deleted]
- PopAlongKid 2y ago
  California has a sensible policy that the IRS should adopt -- extensions are automatic. That's right, they only care that you pay at least 90% of your total tax liability by the April due date. There is never a failure to file (FTF) penalty as long as you file your California return by the October extension date.
- joezydeco 2y ago
  The penalties and interest that the IRS charges are cheaper than any bank or credit card rate. This time around, it's a cheap casino bet that the IRS will be totally abolished by the end of the year. Approach random systems with random strategies.
  - outer_web 2y ago
    If the IRS is gone by EOY then you'd better buy canned food and ammunition.
  - junar 2y ago
    It's about 13% annualized right now. You need to add up both the failure to pay penalty at 0.5% per month and the interest at 7% per year. With good credit, you can likely get a cheaper loan.
- cyanydeez 2y ago
  My mother does, and it's because she's procrastinating and often thats because its a lot of paper work from a long work history and various benefits.
rdtsc 2y ago
> Waiting to pay: The 1.1% drop in returns so far may be tied to the fact that the number of returns with balances due – as opposed to a refund paid out – has been going up in recent years, said North Carolina-based CPA Jim Buttonow, who worked at the IRS for nearly two decades before going into the private sector. I can see that. If more people owe money as opposed to getting a refund, there is more incentive to pay later. If US govt owes you money, you handed Uncle Sam a 0% loan, and then it makes sense to file as early as possible. This one is interesting: > Refusing to file in protest: Every year, a small number of filers politically object to filing and paying taxes for different reasons. This year is no different. > Olson said someone recently sent her a letter in the mail containing a copy of an angry letter they had sent to Treasury Secretary Scott Bessent. “It said they didn’t want to file their tax return and pay taxes because they were upset that the Trump administration was trying to breach taxpayer confidentiality,” Olson said. That's happening with one of my acquaintances. They canvassed for Harris and were quite upset at the loss. As a form of protest they won't be filing their taxes. I don't know what happens then, I am not bold enough to try it myself. Even if a more friendly administration returns after 4 years, will they be willing to amnesty people who took this route. I wouldn't bet on it, and I don't see millions of people going for that option somehow, either.
- refurb 2y ago
  > If more people owe money as opposed to getting a refund, there is more incentive to pay later. An extension doesnt change when the taxes are due.
  - rdtsc 2y ago
    Ah that’s true. Failure to pay is 0.5 percent of the unpaid balance per month. Are there investments that pay more to make it worth it? Maybe it about not wanting to eat stock loss yet having to sell in what looks like a bad market if they plan on using that to pay taxes.
    - refurb 2y ago
      The current penalty is 7% interest on unpaid amounts. Back when interest rates were low, it was 2-3% which you could easily beat, but 7% is tougher.
Havoc 2y ago
Reflection of struggling consumers? Or the mass firings at IRS? Or something else entirely?
- _mlbt 2y ago
  I’m guessing it’s mostly this… > Fear of deportation: Undocumented immigrants register with the IRS and pay billions of dollars in taxes every year. Multiple sources said members of this community might be holding back during this tax season, as the Trump administration tries to use IRS data to facilitate deportations
  - sorcerer-mar 2y ago
    Cutting inflows to own the libs
    - chung8123 2y ago
      Not filing taxes doesn't mean the money wasn't collected though.
silexia 2y ago
Illegal immigrants are no longer filing tax returns out of fear of deportation.
outer_web 2y ago
Direct file and DOGE issues, fear of deportation, belief that the IRS will be dismantled... it's amazing how many different ways the current administration has damaged its revenue streams.
- graymatters 2y ago
  [flagged]
  - outer_web 2y ago
    The income tax revenue stream is absolutely being damaged. Your belief that tariffs will supplement the federal revenue stream seems to be based on the assumption that no other variables will change with reciprocal tariffs between the US and rest of the world.
    - cyanydeez 2y ago
      dont forget their not recipricol tarrifs. Their inversions of trade deficits.
  - iAMkenough 2y ago
    Source? Everything I'm seeing shows the opposite. Only the current administration seems to be saying that, but they lie out both sides of their mouth every day.
  - xdennis 2y ago
    > Tariffs are going to bring in huge amounts of money. Which in turn can and should result in lowered taxes. Tariffs are taxes. Are you really going to be happy if you pay less in taxes but make up for it by paying tariffs? But I wouldn't be so quick to rejoice. During Trump's previous term much of the money collected was given to farmers as subsidies for their losses from the counter tariffs.
    - silisili 2y ago
      > Are you really going to be happy if you pay less in taxes but make up for it by paying tariffs? FWIW, there are proponents of something called Fair Tax, which replaces income tax with a national sales tax. Either 25 or 30% IIRC. I never looked at it to determine if it was viable, but it seemed to have some level of support because I kept seeing it pop up. From what I can tell, that isn't completely different to the idea of replacing income taxes with tariffs, I guess, except that it doesn't apply to US goods.
iszomer 2y ago
IRS' DirectFile hasn't matured yet to the point of accepting health insurance and retirement data; it could only process basic W-2's. At least they made a good effort in it, will try again next year.
- HaZeust 2y ago
  >and retirement data https://www.youtube.com/watch?v=tYikGwT9dD4 https://www.youtube.com/watch?v=tYikGwT9dD4
- graymatters 2y ago
  Yes. It is IRS is deliberately dragging its feet to make it a real option for millions and millions of Americans. So that the near monopoly Intuit can rake in billions in sales each year.
- outer_web 2y ago
  Didn't Elon 'delete' the GSA group that did DirectFile?
- iAMkenough 2y ago
  I doubt it's around next year. Republicans say it's a waste of money, 18F and its priorities were "deleted" by DOGE, and private tax preparation companies can more easily buy influence in the federal government now. Providing a free service to make Americans' lives easier is not part of the business plan for the current administration. Scott Bessent only committed to keeping it available for the current tax season during his Treasury Secretary confirmation hearings.
  - iszomer 2y ago
    The more you know; ChatGPT and xAI have fascinating responses on clarifications; TIL what ad hominem's are. - What DOGE (allegedly) did, the GSA's + 18F's role in DirectFile, who is Scott Bessent: https://x.com/i/grok/share/HPCbOS8C5MCC7Uvwok2bg6uIk https://x.com/i/grok/share/HPCbOS8C5MCC7Uvwok2bg6uIk - It `felt` like an attack but I couldn't articulate it: https://chatgpt.com/share/67f47c39-1e98-8003-a072-2c083fbe9b4b https://chatgpt.com/share/67f47c39-1e98-8003-a072-2c083fbe9b...
cma 2y ago
Hurricanes in the south have extended deadlines past the normal extended deadline.
ameliaquining 2y ago
It sounds a little like the reporters don't actually know why filings are down, and are grasping at straws a bit.

67 points by MilnerRoute 2y ago

I’m aware of some people who _always_ file an extension, but I haven’t pinned them down on why. Does anyone here file an extension in most/all years? Curious the reason.

deleted 2y ago
[deleted]
milesvp 2y ago
The way I understand it is that some people put off filing as long as possible because they get a better return on other investments. They’re willing to pay interest and other fees on their taxes in order to pay as late as possible. I haven’t looked into this personally because I tend to be risk averse enough to pay off relatively low interest rate loans, but I’ve heard at least one personal anecdote once removed to this effect.
- yodsanklai 2y ago
  > because they get a better return on other investments let's hope their investment isn't the S&P500
rootsudo 2y ago
You can also file off season, get all deductions prepared, and put tax money in stocks and get a good return, usually. Last few years it was better to wait and then get pay lower. This year, maybe because the IRS is gutted the extensions wouldn’t be manually reviewed and a reduction in audits?
- muro 2y ago
  > put tax money in stocks and get a good return except now, I guess...
  - rogerrogerr 2y ago
    Now might be a historically good time to do it… or historically bad. But it’s definitely historical.
qaboutthat 2y ago
I almost never get all my K-1s in order in time to file. So I basically always file for an extension.
- afpx 2y ago
  Somehow all of my K-1s came early this year. It's the first time in 20 years that I didn't have to file an extension!
- qwerpy 2y ago
  Adding on to this. Had one K-1 come late and my CPAs strongly advised filing for an extension to give them enough time to do thorough reviews. Didn’t save me any money, they still told me roughly how much to send to the IRS immediately.
creer 2y ago
Filing an extension doesn't change when income tax is due - but it changes the deadline for various things. Not just the 1040 filing deadline. Other procedures do not state their own deadline but rely of [the day your tax return is due, including extensions]. And there is no cost or penalty for filing the extension. So you file the extension and sort out the rest later. I have in the past filed the extension (to lock in the extension date), then just days later filed my 1040 - because for once it happened to be ready early. If you file your 1040 package without having filed for extension, you forfeit that later deadline for the rest.
matttproud 2y ago
If you are an American who lives abroad, you still need to file a tax return and possibly pay an obligation (two countries do citizenship based taxation: U.S. since Civil War and Eritrea). To properly file taxes when living abroad, you usually file a tax return in your country of domicile first and then transfer select facts to the American one for credits, deductions, and other offsets. All of this means minimally doing two tax filings. So: there you go. Heaven help you if you ever live in a place where the tax window is incompatible with the American ones.
- noodlesUK 2y ago
  > Heaven help you if you ever live in a place where the tax window is incompatible with the American ones. The lack of matchup between the UK tax year from 6-Apr to 5-Apr against the US tax year of 1 Jan to 31 Dec is the bane of my existence.
  - CogitoCogito 2y ago
    How do you deal with this practically? If an American moved to the UK now (after April 6th of this year), how would you recommend dealing with it? Even if your answer is to get a tax accountant, do you recommend doing that early?
    - noodlesUK 2y ago
      Not an accountant, simply talking from my experience. If you're moving after April 6th you're probably going to be fine on the UK side. If you have any US income in the tax year you can claim either split year (on the foreign pages) or treaty residence (using hs302) in the US up until you move (assuming you file Self Assessment, most PAYE employees don't, though you strictly should given the foreign stuff). HMRC is way nicer and easier to work with than the IRS. It's a breath of fresh air. This is pretty simple, but UK accountants are also pretty cheap. The trouble is on the US side. If you're an American citizen you are liable to pay US taxes on all your income. If you're outside the US for most of the tax year, you can claim the FEIE and if you make less than ~$130,000, you have little else to do. If you're PAYE in the UK, you can claim the FTC on the cash basis in the US and you will probably also be fine. This is all fairly simple to do, and depending on your comfort levels you can probably do it in TaxAct or myExpatTaxes online. You also need to file FBARs and possibly 8938s every April. The trouble is if you are a sole trader or similar in the UK. This makes the FTC really hard. You will probably want a US accountant with knowledge of foreign tax if you are self-employed. Buzzacott is a firm I have seen do some good work for friends of mine with complex US and UK tax filings (though I have not personally used them). You can expect to pay thousands of dollars in tax prep fees every year if you use an accountant. This stuff seriously exceeds the knowledge of most US CPAs, so you will need someone who specifically advertises this. Also as an American you need to avoid pretty much all of the useful tax-planning tools here in the UK. You can't really have a S&S ISA, or any other kind of tax-advantaged account other than a workplace pension without it all going totally bananas on the US side. You also can't own a UK limited company (more than ~10%) without getting whacked with crazy 5471 reporting. Same applies to UK trusts, you can't touch them without 3520 reporting (even for trivial things like life insurance trusts here in the UK, and even certain pension products). Many banks and financial services providers won't touch Americans with a 10 foot pole. On the other hand you can potentially save a lot in taxes if you ever move back to the US if you've accumulated a lot of FTC carry forward. You can also probably pay a pretty minimal amount of US student loans if you're on IBR because the payments are based on your AGI which will be artificially low. The US needs to abolish citizenship based taxation and chill out on the reporting requirements (which are generally the worst part) for people who generally live abroad. However, I wouldn't hold my breath. Even though the current admin has said they'll get rid of it, I just don't see that there's much political capital to spend on this issue. There aren't that many Americans living abroad, and most Americans don't give a shit about this sort of thing.
deleted 2y ago
[deleted]
PopAlongKid 2y ago
California has a sensible policy that the IRS should adopt -- extensions are automatic. That's right, they only care that you pay at least 90% of your total tax liability by the April due date. There is never a failure to file (FTF) penalty as long as you file your California return by the October extension date.
joezydeco 2y ago
The penalties and interest that the IRS charges are cheaper than any bank or credit card rate. This time around, it's a cheap casino bet that the IRS will be totally abolished by the end of the year. Approach random systems with random strategies.
- outer_web 2y ago
  If the IRS is gone by EOY then you'd better buy canned food and ammunition.
- junar 2y ago
  It's about 13% annualized right now. You need to add up both the failure to pay penalty at 0.5% per month and the interest at 7% per year. With good credit, you can likely get a cheaper loan.
cyanydeez 2y ago
My mother does, and it's because she's procrastinating and often thats because its a lot of paper work from a long work history and various benefits.

rdtsc 2y ago

> Waiting to pay: The 1.1% drop in returns so far may be tied to the fact that the number of returns with balances due – as opposed to a refund paid out – has been going up in recent years, said North Carolina-based CPA Jim Buttonow, who worked at the IRS for nearly two decades before going into the private sector. I can see that. If more people owe money as opposed to getting a refund, there is more incentive to pay later. If US govt owes you money, you handed Uncle Sam a 0% loan, and then it makes sense to file as early as possible. This one is interesting: > Refusing to file in protest: Every year, a small number of filers politically object to filing and paying taxes for different reasons. This year is no different. > Olson said someone recently sent her a letter in the mail containing a copy of an angry letter they had sent to Treasury Secretary Scott Bessent. “It said they didn’t want to file their tax return and pay taxes because they were upset that the Trump administration was trying to breach taxpayer confidentiality,” Olson said. That's happening with one of my acquaintances. They canvassed for Harris and were quite upset at the loss. As a form of protest they won't be filing their taxes. I don't know what happens then, I am not bold enough to try it myself. Even if a more friendly administration returns after 4 years, will they be willing to amnesty people who took this route. I wouldn't bet on it, and I don't see millions of people going for that option somehow, either.

refurb 2y ago
> If more people owe money as opposed to getting a refund, there is more incentive to pay later. An extension doesnt change when the taxes are due.
- rdtsc 2y ago
  Ah that’s true. Failure to pay is 0.5 percent of the unpaid balance per month. Are there investments that pay more to make it worth it? Maybe it about not wanting to eat stock loss yet having to sell in what looks like a bad market if they plan on using that to pay taxes.
  - refurb 2y ago
    The current penalty is 7% interest on unpaid amounts. Back when interest rates were low, it was 2-3% which you could easily beat, but 7% is tougher.

Havoc 2y ago

Reflection of struggling consumers? Or the mass firings at IRS? Or something else entirely?

_mlbt 2y ago
I’m guessing it’s mostly this… > Fear of deportation: Undocumented immigrants register with the IRS and pay billions of dollars in taxes every year. Multiple sources said members of this community might be holding back during this tax season, as the Trump administration tries to use IRS data to facilitate deportations
- sorcerer-mar 2y ago
  Cutting inflows to own the libs
  - chung8123 2y ago
    Not filing taxes doesn't mean the money wasn't collected though.

silexia 2y ago

Illegal immigrants are no longer filing tax returns out of fear of deportation.

outer_web 2y ago

Direct file and DOGE issues, fear of deportation, belief that the IRS will be dismantled... it's amazing how many different ways the current administration has damaged its revenue streams.

graymatters 2y ago
[flagged]
- outer_web 2y ago
  The income tax revenue stream is absolutely being damaged. Your belief that tariffs will supplement the federal revenue stream seems to be based on the assumption that no other variables will change with reciprocal tariffs between the US and rest of the world.
  - cyanydeez 2y ago
    dont forget their not recipricol tarrifs. Their inversions of trade deficits.
- iAMkenough 2y ago
  Source? Everything I'm seeing shows the opposite. Only the current administration seems to be saying that, but they lie out both sides of their mouth every day.
- xdennis 2y ago
  > Tariffs are going to bring in huge amounts of money. Which in turn can and should result in lowered taxes. Tariffs are taxes. Are you really going to be happy if you pay less in taxes but make up for it by paying tariffs? But I wouldn't be so quick to rejoice. During Trump's previous term much of the money collected was given to farmers as subsidies for their losses from the counter tariffs.
  - silisili 2y ago
    > Are you really going to be happy if you pay less in taxes but make up for it by paying tariffs? FWIW, there are proponents of something called Fair Tax, which replaces income tax with a national sales tax. Either 25 or 30% IIRC. I never looked at it to determine if it was viable, but it seemed to have some level of support because I kept seeing it pop up. From what I can tell, that isn't completely different to the idea of replacing income taxes with tariffs, I guess, except that it doesn't apply to US goods.

iszomer 2y ago

IRS' DirectFile hasn't matured yet to the point of accepting health insurance and retirement data; it could only process basic W-2's. At least they made a good effort in it, will try again next year.

HaZeust 2y ago
>and retirement data https://www.youtube.com/watch?v=tYikGwT9dD4 https://www.youtube.com/watch?v=tYikGwT9dD4
graymatters 2y ago
Yes. It is IRS is deliberately dragging its feet to make it a real option for millions and millions of Americans. So that the near monopoly Intuit can rake in billions in sales each year.
outer_web 2y ago
Didn't Elon 'delete' the GSA group that did DirectFile?
iAMkenough 2y ago
I doubt it's around next year. Republicans say it's a waste of money, 18F and its priorities were "deleted" by DOGE, and private tax preparation companies can more easily buy influence in the federal government now. Providing a free service to make Americans' lives easier is not part of the business plan for the current administration. Scott Bessent only committed to keeping it available for the current tax season during his Treasury Secretary confirmation hearings.
- iszomer 2y ago
  The more you know; ChatGPT and xAI have fascinating responses on clarifications; TIL what ad hominem's are. - What DOGE (allegedly) did, the GSA's + 18F's role in DirectFile, who is Scott Bessent: https://x.com/i/grok/share/HPCbOS8C5MCC7Uvwok2bg6uIk https://x.com/i/grok/share/HPCbOS8C5MCC7Uvwok2bg6uIk - It `felt` like an attack but I couldn't articulate it: https://chatgpt.com/share/67f47c39-1e98-8003-a072-2c083fbe9b4b https://chatgpt.com/share/67f47c39-1e98-8003-a072-2c083fbe9b...

cma 2y ago

Hurricanes in the south have extended deadlines past the normal extended deadline.

ameliaquining 2y ago

It sounds a little like the reporters don't actually know why filings are down, and are grasping at straws a bit.