Should I File or Extend This Year?

With a significant tax bill seemingly stuck in Congress, many clients are asking, “Should I file or extend for the March 15 and April 15 tax deadlines? 

Some background:  The Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) stormed through the House of Representatives with a resounding bipartisan vote (357-70) approving the bill on January 31, 2024. However, no clear movement has been generated in the Senate, where the bill remains in limbo, waiting to be either voted on in its current form, or debated, marked up and potentially updated. 

The House of Representatives version of the bill includes business friendly changes to depreciation deductions and the deductibility of research and development (R&D) expenses. The House bill also includes enhancements and lookback provisions for the child tax credit, among other items. 

The IRS Commissioner has already spoken publicly and urged individual taxpayers not to wait to file their 2023 personal tax returns, with or without the tax bill signed into law. In fact, the IRS is already setting up automated mechanisms to issue retroactive child tax credit refunds to any eligible taxpayers who filed under the current child tax credit regime but become eligible for more money if the bill becomes law.

However, if you own a business, or receive a K-1 from a business, that is impacted by the research and development expense law changes under Section 174, or are claiming depreciation deductions for 2023, it makes sense to extend your tax filing while we wait for movement in Congress. The pending legislation, if passed through by the Senate as currently constituted, would provide favorable business adjustments and much needed relief to many companies and their stakeholders across the country. 

Keep in mind, filing an extension grants you additional time to file a tax return, and may help avoid a costly process (and further delays) if 2023 tax returns are eventually amended. But the extension does not grant extra time to pay the taxes due. Therefore, taxpayers should file their 2023 extensions with a tax payment sufficient to cover their calculated liabilities under the current tax law.

Meanwhile, we anxiously watch for any movement or signal from Washington that might indicate the much needed relief for families, workers, and businesses across the country is on the way.  

If you have any questions about this or any other tax-related issues, please contact Gray, Gray & Gray at 781.407.0300.

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