What to know as the April 18 tax filing deadline approaches

cheek

The annual tax filing season ends this year on April 18, unless you request a six-month extension. Here are some timely tax tips and other observations as we head down the wire.

Extensions available, but with caveats

If you haven’t yet filed your tax return and don’t expect to be able to do so by April 18, this year’s filing deadline, automatic six-month extensions are available. Sounds easy enough, but there are a few caveats.

First of all, it is important to file your extension request on time, before April 18th. You can submit Internal Revenue Service Form 4868 electronically through irs.gov or mail it before that date. More information on how to do this is available on irs.gov.

If you’re mailing it, Rob Cordasco, a certified public accountant, recommends mailing it with proof that you received it on time, given what he calls staffing issues, delays and a general “dysfunction” at the IRS. The agency has had issues processing paperwork and is still working to clear its backlog, he noted.

Second, it’s important to realize that an extension gives you more time to file your return, but not more time to pay the taxes you owe. You still have to pay your estimated tax by April 18, and it might be a good idea to pay a little more to avoid an underpayment penalty, he suggests.

Third, it is better to deposit with or without an extension than not to deposit at all, even if you cannot pay the full amount at the moment. The penalty for not reporting can be 10 times more expensive than the penalty for underpayment, the IRS said.

Most taxpayers skip the wire and instead file their returns early in the year. Makes sense if you’re expecting a refund. It’s also a wise move to thwart potential identity thieves. Filing your tax return early “prevents others from filing under your identity and getting your refund,” Cordasco said.

Still, many taxpayers can’t file early and might not even meet the April 18 deadline. Cordasco estimates that at least 40% of its customers need an extension.

An extension this year gives you until October 17 to submit your return. This is also true for Arizona tax return extensions.

A last minute tax saving opportunity

Relatively few Americans are contributing new money to Individual Retirement Accounts these days. Why? Because there are confusing rules, eligibility restrictions, and sometimes better options — namely, 401(k)-style work plans with employer matching funds.

Still, IRAs remain a viable strategy, especially at this time of year, for eligible individuals who may need a last-minute deduction to reduce their 2021 tax liability by April 18. Contributions of up to $6,000 (plus an additional $1,000 for those age 50 and older) may still count for the 2021 tax year.

So far this year, until March 15, contributions to the IRA were stable compared to the same period last year, but contributions have increased by almost 9% compared to the same period in 2021 , reports Fidelity Investments.

While IRAs can make sense for reasons other than deductions, such as long-term tax-sheltered growth, it’s the deduction component that piques the interest.

Workers not covered by a workplace retirement plan like a 401(k) program, and without such spousal coverage, can get full deductions with no income limitation. For those covered by workplace, deductions are generally at least partially available with income below $76,000 (single) or $125,000 (married jointly filed). Fidelity.com websiteand other sources, provide more details.

Arizona also offers tax breaks that are still available for 2021, including qualifying charitable and school contribution credits. Donations in support of these programs must be made by April 18.

IRS refunds from 2018 still available

The IRS said it has unclaimed income tax refunds totaling nearly $1.5 billion nationwide, including about $34 million for Arizonans. The problem? The roughly 1.5 million Americans who may be eligible have just days to claim their money by filing a 2018 federal tax return by April 18, 2022.

The deadline affects people who did not file returns for 2018. The IRS estimates the median or median potential refund for 2018 at around $813.

In cases where a federal tax return has not been filed, most taxpayers have three years to request a refund. For 2018 filings, the window closes on April 18 (residents of Maine and Massachusetts have until April 19).

Refund amounts will be applied to any money still owed to the IRS or a state tax agency and can be used to offset unpaid child support or outstanding federal debts such as student loans.

By failing to file a return, people could lose more than just a refund of taxes withheld or paid in 2018. Many moderate-income workers could also be eligible for the earned income tax credit, which for 2018 was worth up to $6,431. Eligibility depends on income and the number of children in the household.

You can request a free salary and income transcript to help you file the previous year’s returns. These documents show salary information received by the IRS, such as Forms W-2, 1098, and 1099. Use the “Get transcript online” tool at irs.gov or complete Form 4506-T.

IRS urged to start scanning

While encouraging taxpayers to file electronically, the IRS has fallen far behind in processing paper tax returns. In mid-March, the order book stood at nearly 15 million. But who, outside of tax circles, realized that the IRS was not using scanning technology?

Erin Collins, the National Taxpayer Advocate, cited the shortcoming in urging the IRS to embrace digitization to process returns and refunds faster.

“The reason paper returns are so difficult is that the IRS still hasn’t implemented technology to machine-read them, so every digit of every paper return must be manually entered into IRS systems. by an employee,” she wrote in a recent blog.

“For the past two decades, state tax agencies have used scanning technology to automate the processing of paper tax returns,” Collins continued. “Meanwhile, the IRS has considered, rejected, proposed, reconsidered, partially implemented, and deferred whether to implement scanning technology.”

The scanning technology, she added, “would speed up the processing of returns, significantly reduce or eliminate transcription errors, and allow the IRS to reassign employees from data entry duties to other positions, thereby which would save tens of millions of dollars in labor costs.”

Although it’s too late for the current filing season, Collins hopes to see the IRS embrace digitization next year.

Contact the reporter at [email protected].

Support local journalism. Subscribe to azcentral.com today.

Comments are closed.