(This article originally appeared in the Philadelphia Inquier)
The tax filing season officially opened late last month and already theInternal Revenue Service is warning individuals and small-business owners to expect delays.
“In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs,” IRS Commissioner Charles Rettig said in a statement. “This is frustrating for taxpayers, for IRS employees, and for me. IRS employees want to do more, and we will continue in 2022 to do everything possible with the resources available to us.”
So how can small-business owners — particularly those expecting refunds or needing extra assistance — minimize these potential delays?
For starters, it’s important to start your tax filing process as early as possible. Meet with your accountant, understand what’s needed, and gather the necessary documents. That way, your accountant can get a head start on your returns before things really get busy in March and April. (If you have a calendar year end S-corporation and partnership, then tax returns are due by March 15, 2022, C-corporation and individual returns are due by April 18 this year. Pennsylvania, New Jersey and Delaware state returns generally follow the same reporting deadlines).
“As the season goes on, the IRS becomes overwhelmed with an increasing number of returns being filed as we get closer to the deadline,” said Frank Pileggi a tax partner in the Philadelphia office of Eisner Advisory Group LLC. “In addition, if the taxpayer is using an accounting firm to prepare its taxes, they can expect faster turnaround times earlier in the season and avoid the need to go on extension.”
The key, according to Pileggi, is to have all of your information organized, complete, and ready to go before sending it to your accountant. “Often, delays occur when trying to chase down those last few pieces of information that are still missing,” he said.
Chris Harvey, a tax specialist and lawyer based in Berwyn, agreed. “The IRS works from the top of the pile down,” Harvey said. “The government has to get many of the delayed 2020 returns done before they can process 2021. So the name of the game is absolutely filing early.”
It’s strongly recommended that you create an online account for yourself and your business at irs.gov/payments/your-online-account. That way, you can more quickly check and receive real-time status of your payments and any other notices pertaining to you and your business. You should also make sure that you’re set up to file electronically, because, according to Pileggi, processing times are significantly faster at the IRS when returns are filed that way.
“These days, sending a paper tax return to the IRS could take months to be processed, as compared to only a few weeks for [an] electronic filing,” he said. “It also makes tracking the refund much easier.”
Pileggi also recommends setting up direct deposit for refund checks because once the return is processed, the money gets deposited right away. “Waiting for a check to be delivered through the mail causes delays and creates the risk of a refund check being lost or stolen,” he said. “Direct deposit eliminates that issue.”
If you’re having a problem receiving your refund — or if you have any other concerns as to how your returns are being handled — it’s worth reaching out to one of the IRS’s taxpayer advocates. This department is dedicated to helping taxpayers cut through red tape and get answers to problems with the agency.
Assuming your return is fairly straightforward, there are many great tax preparation applications, such as Intuit TurboTax, H&R Block, and TaxSlayer, that can do the job for you. However, most of the accountants I speak to still recommend getting an expert to review your return before you file it because even as good as these applications are, it’s helpful to have an extra set of eyes — particularly someone familiar with your business — looking at the numbers.
You can always extend your tax return deadline if you’re not prepared to file, but be aware that you will need to have made all of your tax payments by the original due date or you could face interest and penalties. Make sure you’ve got all your payments in on time and set yourself up to pay electronically on the Internal Revenue Service’s website at irs.gov/payments.
Mitch Gerstein, a senior tax adviser of Isdaner & Co. in Bala Cynwyd, also says not to let any outstanding 2020 returns stop you from filing your 2021 returns.
“For some taxpayers, their 2020 tax returns are still being processed by the IRS,” he said. “But they can still file their 2021 tax returns.”
But in the end, it’s all about getting in line as soon as possible — both with your accountant and the IRS.
“It’s hard to find clients that want their stuff done in February because everybody wants it done in March and April,” Harvey said. “But accountants have more time available in February than in March, which means that If you’re expecting a refund and you wait until April to file, you’ll be lucky to see that refund in June.”