Tax day is not far off. If you haven’t done your taxes yet, it’s time to bite the bullet and get down to business.
If you’ve procrastinated, you’re not alone. One in seven Americans file in the final week, according to FiveThirtyEight. They—and you—don’t get any extra time to file federal taxes like we did the past three years. Most of us must e-file or post-mark our taxes by 11:59 p.m. on Monday, April 15.
People in Maine and Massachusetts are the exception. They celebrate Patriot’s Day on that Monday and Tuesday, April 16 is Emancipation Day in the District of Columbia, so not much gets done in the nation’s capital that day. Everyone is back to work on Wednesday, April 17, and Maine and Massachusetts residents need to file by the end of that day.
Some state tax filing deadlines are even longer. Oklahomans get to April 20. Hawaiians get until April 22. Delaware and Iowa residents get to April 30. Virginia and South Carolina inhabitants get until May 1. The longest extension is Louisiana—citizens there don’t have to file state taxes until May 15.
If you live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming, you don’t have to worry about state income tax at all, though NH and TN denizens do get taxed on interest and dividends.
Filing doesn’t need to be a hassle. Today’s tax-prep software painlessly takes you through the steps needed to file a clean, correct return in a timely fashion. The software saves your work as you go, so start now and finish when you have all the documents you require. Legally, most tax documents such as W-2s, 1099s, etc., should be mailed with a postmark by Jan. 31, though there are a few exceptions.
Don’t file until you’re sure you’ve got all the forms. Not only does it put a bigger target on you for an audit, it means more paperwork later when you file an amendment (Form 1040X; you’ve got three years from the original filing date to file an amendment to get a refund, and 1040X cannot be e-filed, only snail mailed). Better to file an extension (see below).
E-filing is the way to go. (If you don’t believe me, read How to Get a Bigger Refund with Tax Software.) Perhaps best of all, nine of 10 e-filers receive refunds within 21 days, as opposed to six weeks for paper filers. Even the IRS prefers it.
There are reports that 2019’s returns are perhaps slower, due to the government shutdown earlier this year. Thus far, calls by National Taxpayers Union Foundation (NTUF) to extend the deadlines due to the shutdown have gone unheard.
In 2015, there was a huge spike in refund theft—1.2 million fraudulent returns filed for $7.2 billion. The IRS and states are desperate to crack down on tax refund fraud, and delaying refunds to verify IDs has become the norm, especially for those getting the Earned Income Tax Credit or Additional Child Tax Credit. Fraudsters love credits, since even a low-income return that owes nothing could qualify.
The IRS will only accept one return per Social Security number, so filing early means beating fraudsters to the punch. Getting a rejection on an e-filed return is the first sign your ID may be compromised. Fixing that issue can be a true hassle, starting with a fraud report.
All of which means, if it takes longer to get your refund, government shutdown aside, it may be for a good reason. The IRS fraud filters are more stringent, catching more legit filers in their claws. In 2015, 40 percent of the 4.8 million flagged by the IRS as fraudulent were not. By the end of 2018, fraud was down a full 72 percent, according to the IRS.
Last year there was something else to worry about. The IRS issued a warning about fraudsters who deposited tax returns to your account even if you didn’t file. Sound great, but then the bad guys tried to trick you into handing the money over to them. It was a phishing+fraud+social engineering scheme, and it could still work this year. If you receive an erroneous refund, contact your bank and have them return the refund to the IRS, then call the IRS at 800-829-1040 for individuals, or 800-829-4933 if it’s for your business, and explain what happened. You can read a lot more about this in Forbes.
And if you do get a snail mail from the IRS, or especially an email, beware of wording like “You must update your IRS e-file immediately,” because that could also be a phishing scam. Forward the emails to firstname.lastname@example.org, or call the numbers above.
Hopefully you’re past worrying about all this because you’ve already filed. But if that were they case, you wouldn’t be reading an article with the headline about last-minute e-filers. So read on for the overview of what you need to know.
Determine the Best Tax Software for You
There are big names and small in online tax preparation software, but this year only H&R Block Deluxe 2019 takes home the Editors’ Choice. The only other software with as high a rating is Intuit TurboTax Deluxe 2019.
The Best Tax Prep Software
All range in price from free versions for federal filing to premium packages. Each offers a variety of ways to claim refunds, provide recommendations to avoid an audit, and offer some form of an accuracy guarantee.
If you need to file on your phone, these are our picks for Best Mobile Tax Apps.
If you’re a freelancer, this guide will help you determine the right tax software.
Skip the Accountant When Running Late
If you aren’t going to extend but don’t want to file yourself, going to an accountant at this time is unlikely to help. Most accountants want you to get everything to them in January or February; they’re all in the weeds during the month of April.
That is a shame if you make less than $54,000 a year or have a disability. Under the Volunteer Income Tax Assistance (VITA) program, such circumstances make you eligible for free in-person tax prep, typically through local community centers. The same is true for anyone over 60 via the Tax Counseling for the Elderly (TCE) program.
Extensions, Penalties, and When to Pay
If you know you’re owed a federal refund, you are allowed to file late. That’s because your typical punishment for filing late is giving up a percentage of your refund. If you owe money, then your refund is zero dollars and you can’t get money from zero.
In fact, the government would appreciate it if people getting a refund did file late. It prefers to collect money. Or keep it: If you wait long enough—three years—your refund becomes government property. So, really, don’t wait.
This does not apply to the states, however. File state taxes on time, whether you’re paying or not.
For the Luddites who fear electronic filing, there are a number of USPS offices open until midnight on April 15—and you must have an 11:59:59 p.m. post mark or you’re late. Use the USPS.com Locations tool to find the office nearest to you that will be open, but call to make sure.
If you don’t file by April 15 (not even an extension), but you owe money, the monetary penalties are 5 percent of any unpaid taxes owed for each month you don’t file, up to 25 percent of the total owed. On top of that, you have to deal with the IRS, which should be punishment enough That’s just for filing late.
Then there’s a penalty for paying late—another 0.5 percent per month. There’s no statute of limitations on lateness—the IRS will come after what you owe even in 80 years, if you last that long. The moral is, file even if you can’t pay what you owe. The penalty for not filing is a lot worse than the penalty for not paying.
You can always file an extension. Form 4868 (“Application for Automatic Extension of Time to File U.S. Individual Income Tax Return”) is part of your e-filing tax software. It also must be filed by April 15, just like a standard tax return. Doing so gives you an extra six months to do the federal paperwork, until October 15, 2017; for states it varies.
There’s one problem. If you owe money, getting an extension doesn’t mean you get to pay later. You are required to pony up at least 90 percent of what you owe by April 15. (Remember, that beats paying the 5 percent per month penalty you receive if you don’t even file an extension.)
Deductions, If Possible
There’s a chance you’re going to be among the hundreds of thousands of citizens of the US this year who don’t even bother itemizing and claiming any deductions. That’s because the standard deduction for most has been increased so much—it’s nearly double—that itemizing deductions may not be worth the hassle. You’ll be just as, if not more, likely to get a refund without doing the extra work.
Plus, a lot of deductions went away under the so-called Tax Cuts and Jobs Act, which has radically changed things for tax payers this year. There are no more deductions for: personal exemptions, SALT deductions, moving expenses, work expenses (until 2025), or even tax preparation fees.
If you are still claiming deductions, here are a couple you can sandwich in at the last minute to help, even though the tax year 2018 is long over.
- Until April 15, 2019, you can contribute to a traditional IRA and deduct the amount from your income. Contribute up to $6,000; if you’re over 50, the limit is raised to $7,000.
- You can still contribute to a SEP-IRA, and/or Health Savings Account for the 2019 calendar year. It’s called the saver’s credit. But don’t go over the maximum contribution of $3,450 for individuals or $6,900 for families. You can add $1,000 if you’re over age 55.
Need to find more deductions? Try these:
- Are you a volunteer? You can’t deduct your time or personal expenses like lunch while helping, but you can claim up to 14 cents per mile driven in your own car while traveling for voluntary acts for a nonprofit. Parking and tolls, too. (That’s right, you can claim mileage for volunteering, but not for actually working.)
- If you pay directly for glasses or contacts, examinations at any doctor, teeth cleanings, hospital visits, ambulance bills, etc., in calendar year 2018—and those medical expenses all add up to more than 7.5 percent of your adjusted gross income, you’ve got a major deduction on your hands. It may feel like it takes a lot to get to 10 percent, but one year with a serious illness can add up quickly.
- If you did any kind of home improvement for medical reasons—like installing a wheelchair ramp—that’s deductible, but again must fall within that 7.5 percent with all the other medical expenses.
Find Your Missing Info
Worried about a missing W-2 or 1099? Get a look at your full IRS transcript—that’s a list of all the income and wage information that was reported about you over the year. You’ll find it at the IRS page called Welcome to Get Transcript.
You’ll need to provide your Social Security number or Individual Tax Identification number (ITIN), date of birth, filing status, and street address for an online transcript that’s suitable for printing.
However, it’s finicky—it wouldn’t accept my mobile phone number, required for extra authentication, so I have to wait to get a snail-mailed activation code.
Know Your IP PIN (If Necessary!)
For a select group of citizens—mainly those who may have a compromised Social Security number—the IRS will assign a six-digit Identity Protection personal identification number (IP PIN). It’s another extra-governmental identifier that might make privacy advocates apoplectic but helps the IRS in its constant battle against fraud.
Including it provides government accountants extra assurance you are you. If you ever got one, even as part of a pilot program, it’s required for all future tax returns. If you can’t find your IP PIN (it comes on a CP01A notice; you’ll get a new one every year), go to the Get An Identity Protection PIN (IP PIN) page to retrieve it. If you’ve never received an IP PIN in your life, consider yourself lucky.
Don’t Sweat the Audits
A lot of people get stressed about an audit, when the IRS comes in and goes over your records to make sure you’re not a big ol’ tax liar. Tax prep software like TurboTax will give you a rundown of why it believes you’re at risk of an audit or not. Audits have declined every year since 2010 because the number of IRS auditors has gone down. As of 2017, it only had 9,510 auditors employed—the lowest number since 1953—and only screened 0.62 percent of individual tax returns.
Filers who make over $1 million a year are statistically more likely to get inspected, no matter what—4.37 percent of returns on high-income households get screened. Sorry, Richie Rich. Same goes for people living overseas.
There might be some random audits, but if you’ve never been audited before, it’s unlikely to happen now if you don’t throw any red flags in your filing. Budget and staffing cuts mean it’s even less likely. The biggest thing is, don’t stand out. The IRS is using algorithms just like everyone else to see who in your income bracket is unique, and unique gets noticed, and noticed gets checked out. Amending your taxes is another red flag that increases audit risk, so use software to file accurately the first time.
Other ways to get audited, according to Forbes: have off-shore accounts, make incredibly huge charitable deductions, publicly protest paying taxes (and then don’t pay!), have a business that’s always reporting losses (don’t be a bad business person), try to write-off your hobbies, or make a lot of math errors in your returns. That last one isn’t a problem if you use tax prep software.
At least one accountant claims a good way to avoid audits is to always file for an extension and submit tax paperwork in the height of summer, because auditors like to vacation, too.
Beware the Scam Calls
In 2015, scam calls from people/bots pretending to be the IRS demanding tax payments were on the rise, persisting into 2018. Most calls are spoofed to appear like they come from Washington D.C.’s 202 area code to give them an air of legitimacy. But they can come from Washington, New York, and Texas area codes, among others.
Even if the caller claiming to be from the IRS knows your name or other personal info, it is a scam: the IRS will never call you to demand an immediate payment. It certainly won’t ask for a credit or debit card number over the phone. The IRS’s first point of contact is always the mail, and you have the right to appeal before you pay a dime, even to the IRS. It’s all part of the Tax Payer Bill of Rights.
If you get such a call, report it on the IRS Impersonation Scam Reporting form, or call 800-366-4484. Smartphone users should download the Hiya app (free on Android and iOS), which has built-in phone spam detection specifically targeting such calls. If you report a call to Hiya, it adds any new numbers to the database to help others.