A Procrastinator’s Guide to Tax Filing: How to Stay Out of Trouble with the IRS

A Procrastinator’s Guide to Tax Filing: How to Stay Out of Trouble with the IRS

Nearly one third of Americans say they wait until the last minute to file, according to a recent survey by the Chamber of Commerce. The top reason respondents gave for waiting is that taxes are too complicated and stressful.

The good news is procrastinators have an additional three days this year, thanks to the calendar: The tax deadline for 2022 income tax returns falls on April 18, 2023, not the usual April 15. 

Those affected by natural disasters have even more time. Taxpayers in most of California, for example, have until Oct. 16 to file their return. There’s no need for affected taxpayers to request extension—it is automatically granted. See the full list of affected disaster areas here (note the deadlines may be different for different places). 

As of March 24, the Internal Revenue Service had processed 80.4 million income tax returns. The average refund size was $2,903, down from $3,263 last year. The expiration of many pandemic-relief programs in 2022 is behind the decline. 

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As you prepare your return, remember that scammers come out in force during tax season. Some target high-income individuals with promises of bogus tax-avoidance schemes. And don’t forget that If the IRS ever needs to contact you, the agency typically does so via the U.S. Postal Service, never via social media or threatening phone call.

Here are some tips for last-minute filers.

Get It Done

If you need more time to do your taxes, you can file for a free, automatic extension here. This will give you until Oct. 16, 2023, to complete your taxes. Note that this only gives you more time to file your return. If you owe the IRS money, you still have to pay by April 18. 

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Extensions are particularly useful for those who don’t yet have all the paperwork needed to complete their returns. Schedule K-1 tax forms are notorious for arriving late, for example. These forms are sent out by partnerships and other entities that pass their tax liability on to shareholders, and if you are an investor in one of them you might be used to filing for an extension. 

But if you don’t have a complicated tax situation and your paperwork is ready, you don’t gain much by waiting. The sooner you file, the quicker you get any refund you’re owed.

IRS Free File, a service that offers guided preparation and free filing, is available to taxpayers with incomes of $73,000 or less. 

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“If you’re an average-income human, hop on one of these sites and get it done,” said Shiloh Johnson, CEO and founder of ComplYant, a digital tax assistant for small businesses in Los Angeles. “You’re just going to procrastinate in October.” 

For those who prefer in-person help, the IRS is offering face-to-face assistance at select locations around the country on April 8.

Report All Your Income

Thirty-six percent of employed respondents to a McKinsey & Company survey identified themselves as independent workers, up from an estimated 27% in 2016. While some of these workers reported doing some independent work on top of a permanent job, 72% said they had only one job.

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Whether from a full-time contract job, a side hustle or tips, all income is taxable in the eyes of the IRS. If you don’t consider yourself a formal business person for whatever reason, rest assured that the government does. 

In December, the IRS postponed the requirement that third-party settlement firms including Venmo, PayPal and Cash App send users and the IRS a report of transactions received above $600 on a Form 1099-K. But not receiving a form doesn’t give you a pass on reporting that income—you still need to declare income above $600. Third-party settlement firms will need to start reporting income exceeding that amount starting this tax year, with 1099-Ks going out in early 2024.

Note that your worldwide income is subject to U.S. income taxes, so also declare any income from a side hustle (or full-time job) abroad.

File and Pay Electronically

Your return will be processed faster if you file electronically. If you owe the IRS money, it’s a good practice to pay electronically as well. 

Don’t avoid filing your return if you owe the IRS an amount that you can’t afford to pay in full, said Pamela Mosiello, partner at UHY LLP, an accounting and consulting firm in New York City. The failure to-file-penalty is larger than the failure-to pay-penalty, she noted. Try to pay at least something. You can set up a payment plan with the IRS for your remaining balance, but either way, you’ll hear from the agency. “Believe me,” Mosiello said. “They’ll be in touch.”

Write to Elizabeth O’Brien at [email protected]

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