Tax Tips For Last-Minute Filers

Still haven’t filed your taxes? There are certainly better ways to spend a weekend but if your plans include tackling your annual Form 1040 and you missed Tuesday’s “Ask Me Anything” session, keep reading for a recap of some of the questions and answers and more information for last-minute filers.

Do I Need To File A Tax Return?

A recent reader question asked, “I got a letter from my bank that I need to report seventeen cents to the IRS. I don’t work and I am disabled. Do I need to file taxes and report the seventeen cents? Can I get in trouble if I don’t report it?”

In general if your adjusted gross income is below the standard deduction for your filing status, you are considered “below the filing threshold” and are not required to file a tax return, even if you received one or more tax forms (W-2s, 1099s, etc.). The standard deduction for a single filer younger than age 65 is $12,950 for tax year 2022. If your total income is under that amount there is no filing requirement.

Also keep in mind that interest in amounts below one dollar are not typically reportable on Form 1040 and most banks won’t issue a Form 1099 for amounts under $10 so you may have to look at your year-end statement for small, but reportable, amounts of year-to-date interest for 2022. Nevertheless, you will not get in trouble for not filing a return if your income is below the filing threshold — no matter how many forms on which your income is reported. A stack of ten $100 W-2s is not going to trigger an IRS notice if that is your only income.

If you are under the filing threshold, you may want to file a return if federal withholding was taken out of your W-2 earnings or your retirement account distributions. You won’t owe any federal tax, so you will get a refund for the amount of the federal income tax withholding on the form(s).

When Is The Filing Deadline?

This year, tax day is Tuesday, April 18 (not April 15). So, if you still haven’t filed your taxes, you have a few extra days to get it done. Also, many areas of the country (including most of California) have been granted automatic extensions of time to file and/or pay. If you think you live in an area that has been granted a disaster-related extension be sure to check out the IRS web page on disaster relief. You may find out you have more time than you thought.

What’s The Best Way To Get Paperwork To The IRS?

National Taxpayer Advocate Erin Collins famously and truthfully stated, “Paper is the IRS’ kryptonite.” It’s always best to file electronically when possible, including filing Form 4868 to request an extension of time to file. Remember to save the acknowledgement that your e-filed document was accepted by the IRS for processing. Sometimes it is necessary to go back into your tax preparation software after you file your return to retrieve (and download) the acknowledgement.

While electronic filing is preferred, it is sometimes necessary to mail paper documents to the IRS. The IRS has closed some service centers and consolidated or changed operations at others. Before mailing your paperwork, it’s a good idea check this IRS web page to ensure you have the correct mailing address.

To avoid issues that could arise if mailed forms or payments are delivered late it is important to be able to prove the items were “timely mailed.” Payments are considered “delivered timely” under IRC § 7502 if they are mailed on or before the deadline so it is important to be able to prove that the payment was timely mailed. Timely mailed means ensuring that the items are postmarked by the deadline. First class mail will often accomplish this, but if you want to be really sure, use Certified Mail (getting the postmark hand stamped at the post office). It’s a bit more work and a bit more expensive, but it will hold up in court.

Should I File My Taxes Even If I Can’t Pay My Tax Bill?

Kelly Phillips Erb says, “Absolutely. There are two penalties that you typically have to worry about: failure to file and failure to pay. By filing your taxes, even if you can’t pay, you’re avoiding the one penalty right off the bat. And if you can’t pay, there are options available—you can do a short-term payment arrangement if it’s just a cash flow issue, or a long-term payment plan (called an installment agreement).”

Kelly says, “Don’t let fears over payment make a problem worse. Go ahead and file.” You can find more information about IRS payment plans on this web page. One more reason to file is that the failure to file penalty is much higher than the failure to pay penalty.

If, for some reason you can’t file on or before this year’s filing deadline, filing to request an automatic extension will stop the failure to file penalty from being assessed.

Isn’t Filing An Extension An Audit Flag?

No. There is absolutely no evidence that asking for or receiving an extension of time to file your tax return is an audit flag. Filing an extension (even if you file on time) can preserve the option to make certain elections late. In other words, if you filed on the original deadline and have a valid extension, you can amend your return to take advantage of an election that must be made on a “timely filed return” because returns with a valid extension are considered timely filed.

Remember, however, that not every extension is valid. Tom Gorczynski, an Enrolled Agent in Phoenix, Arizona, reminds taxpayers, “While the IRS automatically accepts all requests for extension, an extension without an appropriate estimate of the tax due runs the risk of later being found invalid either by the IRS or by the U.S. Tax Court.”

Treasury regulations require extensions to show “the total amount properly estimated as tax for the tax year” and allow the IRS to terminate an extension at any time as long as the taxpayer is mailed a notice of termination at least ten days before the termination date.

Gorczynski notes that the IRS once ruled (Rev. Rul. 79-112) that “an extension that showed an estimated income tax liability of $0 was invalid because there was ample evidence available to the taxpayer that there would be an income tax liability.” Tom also mentions that the U.S. Tax Court invalidated an extension “because the taxpayers severely underestimated their tax liability and made no effort to provide a reasonable estimate.”

If an extension is terminated or otherwise deemed to be invalid the taxpayer will be subject to all applicable penalties for late filing.

Further, while the time to file the return has been extended, the time to pay has not. Failure to pay penalties and interest will be assessed unless full payment is made with the timely filed extension.

If your tax professional puts you on extension, consider yourself lucky. Your tax pro will be working on your return after having a chance to rest and regroup after another busy regular filing season.

If I’m Missing Tax Information, Should I File Before The Deadline Anyway?

As Kelly noted in the Ask Me Anything session, “There’s a lot of pressure to file early, but we all know that there are still Forms 1099 and other tax documents that can make a late appearance.” If you know you are missing information, do not file before the deadline. It is best to wait until you are sure you have everything, even if that means requesting an extension of time to file.

The IRS makes wage and income transcripts available to taxpayers and tax professionals with the proper authorization on file in late May. If you think you may be missing tax information, you can request your wage and income transcript by mail or online with an IRS online account. You can use the information in the transcript to double check income items you may have forgotten to retrieve online or never received in the mail.

What If I Already Filed And Forgot To Include Some Income?

It depends. If there is still time before the filing deadline, you can file a superseded return. This is a return that replaces your previously filed return. Some tax software will allow you to prepare a superseded return but Kelly says, “If yours doesn’t just write ‘SUPERSEDED RETURN’ across the top of your Form 1040.” Unfortunately, if your previously filed return was filed and accepted by the IRS, you will have to file the superseded return on paper and mail it to the IRS.

If the additional income you need to report is relatively small it may be worth the small amount of penalties and interest to wait until the IRS issues a CP2000 matching notice for the missing amount and pay the required amount due on the notice.

If the missing forms would result in an additional refund it may be best to wait until after the filing deadline and electronically file an amended return using Form 1040-X. Whenever possible it’s best to avoid any solution that has you sending paper to the IRS.

What Is The Best Way To Make Payments To The IRS?

If you have a tax professional, that person can (and often will) set up your payment for direct debit through their professional tax software.

You can also make a payment using a bank account or credit or debit card using IRS Direct Pay. The system provides an immediate confirmation that you can use to prove your payment was made timely.

If the payment is large, Kelly recommends mailing a check. Make the check payable to U.S. Treasury, not IRS. Checks made out to “Internal Revenue Service” or “IRS” will typically be cashed and applied to your balance due, but in the event your check goes astray, “IRS” is easy to turn into “MRS.” and could result in your check being fraudulently cashed.

Be sure that you can prove timely mailing of your check by using certified mail or another method that provides you with proof of postmark. Remember to write your taxpayer identification number (TIN, usually your Social Security number) and the tax year to which the payment should be applied in the memo field. And keep a copy if your bank doesn’t provide you with electronic copies of your cancelled checks.

Finally, to avoid having to make a payment to the IRS on filing day next year, adjust your quarterly estimates if you are self-employed (this is where a good tax professional really helps). If you have an employer and get a Form W-2, adjust your Form W-4 to have more federal income tax withheld from each paycheck. The new Form W-4 and new tax tables, however, appear to be geared towards taxpayers breaking even rather than getting a refund. Tax professionals especially have noted that higher income taxpayers are often under withheld. Unfortunately, it is difficult to prepare a correct Form W-4 without a thorough understanding of your income and employer withholding. Some help is available (including a withholding tool) on irs.gov.