I know people who put off filing their tax returns, and the reasons are numerous. They dread the process, they don’t have time, they forget (really?), they owe money and can’t pay it, or they believe they have a refund coming and figure they’ll get around to it when they need that money. If you are one of those people, please keep reading. I can likely change your mind.
I understand those who just plain don’t like to prepare a tax return. I have many people in my life that fall into this category, and I don’t fault them. Let’s face it, unless you actually like working on a tax return (which, by the way, I do), it can be an agonizing experience. Not everyone is wired to be good at, let alone enjoy, this task. If that describes you, rather than fall behind and face the possible consequences (keep reading for those), hire someone to do it for you. You pay others to do various tasks for you, so why not one as important as this?
What if you don’t have time to work on your tax return? Who has time to research the latest tax law changes to ensure you don’t screw up the return? Sure, some of the do-it-yourself software can be helpful. But unless you know how to answer the questions correctly (the programs don’t always give you enough guidance), you can end up putting wrong information into your return. And the IRS doesn’t care that you didn’t understand what the software was asking you. They’re going to penalize you anyway.
What? You just forgot your tax return was due? OK, first of all, if that’s true, you might want to consider that your life is a little too busy. But I understand that there are times when life throws unexpected things at you. Deadlines can get missed. But please, don’t let that be an excuse to put off filing once you realize you are late. If you owe money, the penalties and interest are accruing each and every day you wait.
Every year, you end up owing taxes when you file your return. And you expect this year is no different. Except this year, you know you won’t have the money to pay the tax in full. This might be the absolute worst excuse not to file! To begin with, the Failure-To-File penalty can be up to 25% of the tax you owe (5% per month for up to five months). Add that to the late payment penalties and interest, and you can easily add 50% or more to the amount you owe. Save that 25% and file, then deal with the tax bill later.
If you were paying close attention to the last reason, you probably noticed that you won’t owe a Failure-To-File penalty if you have a refund coming. In fact, you won’t owe ANY penalties or interest for not filing on time if you have a refund coming. So why file on time? The best reason I can think of is: why let the government keep YOUR money? You overpaid your taxes last year, so that money belongs to you. You’ve already given them an interest-free loan, so why not demand they give your money back? Personally, I would rather that money be in my bank account than the government’s.
While I may think that’s the best reason, there’s another very important reason for filing on time even if you think you are due a refund: what if your estimates were wrong and you actually owe money? How would you feel if, a year from now (or whenever you decide to file), you learn that you owe money, plus penalties, plus interest? I can assure you, you will be quite unhappy with yourself. So don’t take an unnecessary risk by assuming you’ll be getting a refund when you haven’t taken the time to calculate it. And if you’ve calculated it, why not just file?
One last thought: even if you have a refund coming, you can’t wait indefinitely to ask for it by filing the return. If you haven’t filed a tax return that shows a refund within three years of the return’s due date, the IRS will keep the money. That’s right, there’s a time limit for requesting a refund. If you miss it by even a single day, unless you had a valid reason for not filing (those are very few), you will not get the money back. So procrastination can actually cost you money.
In summary, even though preparing and filing tax returns is probably not on your list of fun activities, there are incentives in place to ensure that you file timely every year. If you have gotten behind and want assistance, I can help. If you just need returns filed, my staff and I stand ready. If you’re behind in paying your taxes, I have the expertise to help you get back in the good graces of the IRS. Contact me to schedule an in-person meeting or a phone or Zoom conference.