Late and Prior-Year Returns

File late tax returns before the IRS catches up with you and insists on penalties.

Many traders have not filed last year’s tax returns for various reasons. If you’re in this boat, don’t worry — we can help. Contact our firm as soon as possible and save yourself from headaches and more substantial penalties down the road. We can prepare your tax return reasonably quickly if you provide all the tax information.

Late entity tax returns: Hopefully, you filed an automatic extension by March 15 for six-months additional time to file a partnership or S-Corp tax return by September 15. The IRS late-filing penalty for S-Corps and partnerships is similar: The IRS assesses $200 per owner, per month, for a maximum of 12 months. Taxpayers may request penalty abatement based on reasonable cause. Ignoring the extension deadline is not reasonable cause. There is also a $260 penalty for failure to furnish a Schedule K-1 to an owner on time, and the penalty is higher if intentionally disregarded. States assess penalties and interest, often based on payments due.

Late individual tax returns: Hopefully, you filed an automatic extension by April 15 for six-months additional time to file an individual tax return by October 15. If not, or if you file after October 15, then late-filing penalties apply, and they are much higher than late-payment penalties. See how these penalties work on page two of 2018 Form 4868.

Why bother filing if I have significant trading losses?

It’s only a matter of time before the IRS sends you a tax notice. Also, the IRS won’t necessarily know you have trading losses and may send a tax bill for trading gains based on your stock proceeds and cost-basis reporting from the broker. Plus it will add penalties and interest, if applicable. Don’t be shocked if your tax bill is several thousand dollars. Remember, the IRS is sent all Form 1099s from your brokers.

Some clients figure they don’t have to file a tax return since they are under the gross income threshold required. While that could be true, they may have substantial proceeds on securities requiring a tax filing. All losses should be reported in order to receive the related tax benefits later on (i.e., capital loss carryovers or NOL carryovers); otherwise, those benefits are wasted forever.

Contact us for assistance

We can calculate your trading gains, losses, and business expenses. We can review your trading activity and your qualification for trader tax status. We can file your return as a business for many additional tax advantages. We may be able to reduce your tax bill considerably. We also can work out a payment plan with the IRS and seek the abatement of penalties.

Late Form 3115 filings for Section 475 elections

If you are eligible for trader tax status and filed a Section 475 election on time (April 15 for individuals), then you should complete the election process by filing a Form 3115 with your tax return. The IRS will not accept a late 475 election statement, but it might allow a late Form 3115. Don’t count on it; try to file the 3115 on time.

Thank you for placing your trust in us,
Robert A. Green, CPA and Darren L. Neuschwander, CPA

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