Kicking the can down the road by requesting a six-month extension for filing your taxes – as a staggering nearly 19 million taxpayers did this year – means plenty of people are looking at an Oct. 17 deadline for filing their federal income tax returns.
“Yes, we are busy. It’s not as bad as the first round of the busy season, but we’re still pretty busy getting the individual returns prepared,” said Robyn Fuller, a certified public accountant and founding partner for J&F Advisors, a small accounting firm in Detroit.
Those filing in the next few weeks will want to make sure to have all their paperwork in hand, especially for any payments they received in 2021 for the advance child tax credit. These advance payments aren’t taxable, but they are an important part of calculating your tax refund when you file a 2021 return.
You also want to know the exact amount you received for stimulus payments in 2021.
“If those amounts don’t align with what the IRS has in their records, that can delay in processing their return,” Fuller said.
If you’re filing a return now, it’s best to file electronically, instead of by paper. While the tax season went somewhat smoothly for many, some who filed paper returns by the April deadline continued to wait for tax refunds in late September. Others saw their money only recently.
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As of late June, the IRS finally completed processing all of the originally filed Form 1040 paper returns without errors that it received in 2021. It’s a first-in, first-out process. Once the returns received in 2021 were processed, the IRS could move on to the paper returns received this year.
The accumulation of paper returns has been a troublesome development since the COVID-19 pandemic shutdowns shook up the system.
Why did so many people request a 2022 tax filing extension?
Every year, a group of people just naturally drag their feet past April and file Form 4868 to request the automatic six-month extension. By filing that form, you get more time to file a completed tax return, not more time to pay your tax bill. You want to pay any amount due – or pay as much as you can – by the April deadline to avoid interest and penalties on what is owed.
This year, the numbers filing for extensions exploded to record levels as some taxpayers hoped the IRS would extend the deadline. Others worried that some last-minute tax changes could be around the corner from Congress. And many weren’t sure how to calculate the child tax credit or the recovery rebate credit.
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“COVID really changed things as far as how people file, the pace at which they’re doing it,” Fuller said. “It just changed the nature of the tax law, too, because so many credits became available.”
Mark Steber, chief tax information officer at Jackson Hewitt Tax Service, said no one really has a firm answer on why so many extensions were requested for 2022, far above even 2020 and 2021.
In typical years before the pandemic, he said, 9 million to 10 million people would request an extension each year.
Nearly 11.6 million taxpayers filed Form 4868 in 2020, and an estimated 13.56 million filed for an extension in 2021.
The IRS said its latest figures through Sept. 23 showed that 18.95 million extension requests were filed in 2022, including nearly 16.4 million that were electronically filed.
What happens if you miss the Oct. 15 tax deadline?
Don’t try to go past the Oct. 17 deadline – which is technically Oct. 15 but delayed until Oct. 17 this year because the 15th is a Saturday.
“If you filed an extension and you don’t file your return, your penalty and interest calculations are grandfathered back to the original April 18 due date,” Steber said.
At this point, documents should be in taxpayers’ hands, including W2, 1099s, K-1s for investments in partnerships. Double-check your numbers and information.
Any missing information or mismatched information on IRS systems can be expected to trigger trouble, including the delay of any refund.
Some tax filers figure they can come close to a number, say what they think they received in stimulus cash, and imagine that the IRS will fix it if necessary. But that’s not a good bet, given all the problems the IRS has been facing.
Steber calls some tax troubles “self-inflicted delay” when tax filers don’t provide exact numbers or information.
The IRS noted that taxpayers who are filing now want to avoid mistakes when claiming the earned income tax credit, the child and dependent care credit, the child tax credit and the recovery rebate credit.
“In 2022, the message is clear: You need to be accurate,” Steber said. “There are no simple tax returns in the pandemic.”