Tax filing deadline: time for a change

I’ve been in public accounting for twenty years. Each year, tax season gets worse. The complexity of the law makes what used to be a simple tax return complicated. As the result, more and more people are driven to seek professional help. Normally, as a CPA, I’d say this was a good thing; after all, I stay in business because of it. But as long as the Congress wants to keep adding to the complexity of the law, then they need to look at changing the tax filing deadline. Here’s why:

Corrected 1099 statements from brokerages
Back in the day, if people had a little extra money, they put it in a savings account in the bank. Nowawdays, people put that extra money into a mutual fund, and those funds are quite often held at brokerage firms. It is not unusual for me to see two, three or four corrected 1099 statements from the various brokerage firms, like Scott & Stringfellow, or Merrill Lynch. And these corrected statements often come right up to the tax filing deadline.

I can’t blame it on the brokerage firms because it isn’t their fault. They report the information provided to them by the mutual fund companies. By law, they are required to issue 1099s by January 31 and they meet the deadline, even though the information they have may be faulty. The mutual fund companies have a difficult time reporting the proper information timely to the brokerage firms. In order to avoid paying taxes, mutual funds have to pay out a large percentage of their gains and income to their shareholders. Most mutual funds do this in December, after they have calculated their profits for the year. Mutual fund profits include income earnings that they have received on their investment portfolio (dividends and interest) plus gains on the investments that they have sold. Short term gains are reported one way, long term gains another. So shortly after paying out their income, they have to figure out what character the income is and pass that information to the brokerage firms, who then report it to their customers.

The time frame for all of this is too short. Move the deadline to February 28 and let them get it right the first time.

Increasing use of corporations and LLCs
In our increasingly litigious environment, everybody is trying to protect their assets. Corporations, especially S Corporations, and LLCs are multiplying like rabbits. While corporate returns are officially due 3/15, a lot of them don’t get filed timely. LLCs, normally taxed as partnerships, are not due until 4/15. A shareholder in an S Corp or a partner in an LLC cannot prepare his or her personal returns until the S Corp or LLC return is completed. And, of course, these entity’s are plunking their excess cash in brokerage accounts! Making the filing deadline for S Corps and LLCs April 30 will result in more of these returns being filed on time.

Holidays
I’m not advocating moving Easter. Every year, though, it falls near the end of tax season. Around here, Easter means spring break for the schools. And guess what happens when spring break rolls around? Vacations. The schools here in Norfolk were closed this week. With Monday’s filing deadline approaching, it has been difficult to reach people. Who wants to talk about taxes when they are on vacation? I’m sure if I was on vacation, I wouldn’t.

Daylight saving time
This was probably a good idea when our lives revolved around agriculture. I think it is time for this little relic to disappear. The last thing I need is one less hour!

Taking all of this into account, the filing deadline for personal returns needs to be later. I think the end of May should be about right. This would allow more accurate returns to be filed, resulting in fewer amended returns and letters from the taxing authorities down the road. I think it’s a win-win situation.

One thing you will notice is that I advocate moving the all of the deadlines to the end of the month. Why the government picked the middle of the month for everything I’ll never know.