Passive Investor Series Part 10: What's Up With March 15
This post originally appeared as the writer's LinkedIn "Passive Investor Pet Peeves" series. It has been re-posted and edited here with permission.
March 15th. This day has come and gone without much fanfare. What is significant about this date? Not only is it the day Justin Timberlake released his 3rd album “The 20/20 Experience”, but it is a much more important date for tax filers.
𝐌𝐚𝐫𝐜𝐡 𝟏𝟓 𝐢𝐬 𝐭𝐡𝐞 𝐝𝐚𝐲 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬𝐞𝐬 𝐜𝐥𝐚𝐬𝐬𝐢𝐟𝐢𝐞𝐝 𝐚𝐬 𝐚 𝐩𝐚𝐫𝐭𝐧𝐞𝐫𝐬𝐡𝐢𝐩 𝐨𝐫 𝐒 𝐜𝐨𝐫𝐩 𝐚𝐫𝐞 𝐫𝐞𝐪𝐮𝐢𝐫𝐞𝐝 𝐭𝐨 𝐟𝐢𝐥𝐞 𝐭𝐡𝐞𝐢𝐫 𝐭𝐚𝐱𝐞𝐬. 𝐀𝐬 𝐚 𝐩𝐚𝐬𝐬𝐢𝐯𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐨𝐫 𝐨𝐫 𝐩𝐚𝐫𝐭𝐧𝐞𝐫, 𝐭𝐡𝐢𝐬 𝐢𝐬 𝐰𝐡𝐞𝐧 𝐲𝐨𝐮 𝐬𝐡𝐨𝐮𝐥𝐝 𝐫𝐞𝐜𝐞𝐢𝐯𝐞 𝐲𝐨𝐮𝐫 𝐊-𝟏 𝐟𝐨𝐫 𝐭𝐚𝐱 𝐟𝐢𝐥𝐢𝐧𝐠.
Out of all the syndications I'm invested in, I've received a total of one K-1 and have been advised by many others to plan to file an extension.
As a passive investor in real estate syndications, it is typical and expected to file a tax extension while waiting for the K-1s. While not a deal breaker, it is a slight annoyance to have to wait for these statements because I want to get my taxes filed and out of the way. 𝐈𝐟 𝐲𝐨𝐮 𝐚𝐫𝐞 𝐜𝐨𝐮𝐫𝐭𝐢𝐧𝐠 𝐢𝐧𝐯𝐞𝐬𝐭𝐨𝐫𝐬 𝐧𝐞𝐰 𝐭𝐨 𝐬𝐲𝐧𝐝𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬, 𝐭𝐡𝐞𝐧 𝐭𝐡𝐢𝐬 𝐢𝐬 𝐚𝐧 𝐞𝐱𝐩𝐞𝐜𝐭𝐚𝐭𝐢𝐨𝐧 𝐭𝐡𝐞𝐲 𝐬𝐡𝐨𝐮𝐥𝐝 𝐞𝐱𝐩𝐞𝐜𝐭 𝐢𝐟 𝐲𝐨𝐮 𝐚𝐬 𝐚𝐧 𝐨𝐩𝐞𝐫𝐚𝐭𝐨𝐫 𝐝𝐨𝐧'𝐭 𝐠𝐞𝐭 𝐊-𝟏𝐬 𝐨𝐮𝐭 𝐨𝐧 𝐭𝐢𝐦𝐞.
As an operator, I can understand there is a lot to do in the business and getting taxes completed may not be high on the priority list. It's easy to think that the investors can file an extension and buy some time with that. However, 𝐫𝐞𝐦𝐞𝐦𝐛𝐞𝐫 𝐭𝐡𝐢𝐬 𝐢𝐬 𝐚 𝐬𝐞𝐫𝐯𝐢𝐜𝐞 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐚𝐧𝐝 𝐩𝐫𝐨𝐯𝐢𝐝𝐢𝐧𝐠 𝐬𝐞𝐫𝐯𝐢𝐜𝐞 𝐭𝐡𝐚𝐭 𝐬𝐭𝐚𝐧𝐝𝐬 𝐨𝐮𝐭 𝐟𝐫𝐨𝐦 𝐨𝐭𝐡𝐞𝐫𝐬 𝐢𝐬 𝐰𝐡𝐚𝐭 𝐰𝐢𝐥𝐥 𝐠𝐞𝐭 𝐲𝐨𝐮 𝐦𝐨𝐫𝐞 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬. Maybe you get K-1s out on time, but others don't; therefore, your passive investor still can't file on time. But, this does set you apart as a more organized and thoughtful operator. 𝑻𝒂𝒙 𝒇𝒊𝒍𝒊𝒏𝒈 𝒊𝒔 𝒏𝒐𝒕 𝒔𝒐𝒎𝒆𝒕𝒉𝒊𝒏𝒈 𝒕𝒉𝒂𝒕 𝒄𝒐𝒎𝒆𝒔 𝒐𝒖𝒕 𝒐𝒇 𝒏𝒐𝒘𝒉𝒆𝒓𝒆, 𝒘𝒆 𝒂𝒍𝒍 𝒌𝒏𝒐𝒘 𝒕𝒉𝒆 𝒂𝒏𝒔𝒘𝒆𝒓𝒔 𝒕𝒐 𝒈𝒆𝒕 𝒕𝒉𝒊𝒔 𝒅𝒐𝒏𝒆.