Last Minute Tax Tips
Tick-tock, the tax filing deadline is coming up and if you are either a procrastinator or someone who has delayed filing because you owe Uncle Sam money, it’s time to get going!
1. File Electronically: IRS efile is available to all taxpayers and many can e-file individual tax returns for free. Electronic filing is the safest, fastest, and easiest way to submit individual tax returns.
2. Check, Double Check, Triple Check: Most tax filing errors are preventable by simply checking Social Security numbers for each person listed on the return, double-checking refunds or balances due, and triple checking signatures and mailing addresses, if you are mailing a return.
3. File or Request an Extension of Time to File: If you can’t get your act together by April 18, you are not off the hook: you must request an extension to file with Form 4868. An extension gives you until October 17 to file your tax return, but importantly, an extension to file is not an extension to pay. That means you need to estimate and pay any owed taxes by the April 18 deadline to avoid any potential penalties and interest. You can also get an extension by paying all or part of your estimated income tax due.
4. Check to See if a Natural Disaster Impacts Your Tax Filing: The IRS has announced extensions because of extreme weather events alerts. Victims of tornadoes in Mississippi and storms in Arkansas have until July 31 to file individual and/or business tax returns and make tax payments; parts of New York that were hit with severe snowstorms have until May 15 to file; and most of California and parts of Alabama and Georgia have until Oct. 16. Victims also have until those dates to make 2022 contributions to their IRAs and HSAs, as well as submit any quarterly estimated tax payments, quarterly payroll, and excise tax returns. Go to irs.gov and search for “Tax Relief in Disaster Situations.”)
5. Extend, Then Contribute: While you may have extra time to file your extension, the deadline to make IRA and Roth IRA contributions for 2022 is still April 18th. However, those with self-employment income who utilize SEP-IRAs have until the October 17th extension deadline to contribute.
6. Don’t Freak Out if You Can’t Pay: You are not the first person who has run up against this issue. The IRS has a few different options to consider for making a payment.
Short-Term Payment Plan: You can request additional time to pay through the Online Payment Agreement application. For no fees, the IRS may grant up to 120 days more to pay the bill for those who owe less than $100,000 in combined tax, penalties, and interest.
Long-Term Payment Plan: You can apply for an IRS installment agreement, which will put you on a longer-term monthly payment plan if you owe $50,000 or less in combined tax, penalties, and interest. However, going this route involves fees. If you pay monthly through automatic withdrawals, there is a $31 setup fee ($130 if you don’t use direct debit), plus accrued penalties and interest, until the balance is paid in full.
Credit or Debit card: While it may seem easier that the two other options, using a card may be the most expensive way to pay taxes, due to the fees associated with plastic.
Remember if you don’t file, the IRS imposes a failure-to-file penalty, which is 5 percent of the unpaid taxes for each month or part of a month that your tax return is late. Ordinarily, the penalty won’t exceed 25 percent of your unpaid taxes. And in case you didn’t know, the IRS charges interest on penalties.