Taxpayers got three extra days to file their federal and Arizona returns this year compared to the norm. Still, lots of people are taking it to the wire. And when they get to the wire, many Americans will discover less refund money waiting for them or a higher-than-expected tax bill.
Through April 4, federal refunds were averaging $2,878 per household, a steep 9% drop from $3,175 at this time last year. Expiring pandemic-related tax credits are partly to blame.
This year’s filing deadline is April 18, which also is the deadline to request an automatic extension by filing Internal Revenue Service Form 4868. That’s three days beyond the normal April 15 deadline, thanks to the Emancipation Day holiday, which is celebrated in Washington, D.C.
As of April 4, the IRS had received 101 million of the 170 million or so returns it expects to receive this filing season. If you are among the taxpayers who haven’t yet filed, here are six things to know:
An automatic extension takes you to mid-October
If you can’t file your returns by April 18, you may receive an automatic extension by submitting IRS Form 4868 through irs.gov or by mailing it and having it postmarked by then. That will give you another six months to file. That’s also true of Arizona extensions. Arizonans may use state Form 204 for an extension but don’t need to submit this if filing a federal extension request with the IRS.
An extension doesn’t let you delay paying taxes
If you can’t file a completed return by April 18 and think you will owe taxes, you should calculate your tax bill as closely as possible and pay any expected tax by then. You might want to overestimate the liability amount a bit to avoid incurring an underpayment penalty. The penalty for not filing at all usually is larger than filing late or underpaying, so it’s wise to file on time or file the extension form by April 18.
“Even though filing a return won’t address the consequences of owing tax, it can help to avoid late filing penalties,” said National Taxpayer Advocate Erin M. Collins.
The IRS will assess a “failure to file” penalty when a tax return isn’t filed by the April 18 due date or by the mid-October extension deadline. The penalty runs 5% of the unpaid tax and is assessed each month or part of a month a return is late, up to 25%. The “failure to pay” penalty is 0.5% for each month and accrues to a maximum of 25%.
More information on these penalties can be read on Collins’ blog at taxpayeradvocate.irs.gov.
Refunds are down significantly this year
As noted, the average federal refund as of April 4 was down roughly 9% from the same time last year. The decline largely reflects the winding down or termination of several pandemic-relief tax benefits, such as an enhanced child tax credit and an enhanced credit for child and dependent care expenses. Also, people last year could claim a modest charitable deduction without itemizing. That break no longer is available.
Refunds can be timely or delayed
The IRS says it issues most refunds on returns submitted electronically within 21 days, while refunds on mailed returns can take four weeks or more. You can get an update by clicking through the “Where’s my refund” tool at irs.gov.
The IRS might reduce your refund if you owe past-due federal or state taxes, state unemployment compensation debts, child support, spousal support or certain other obligations. Also, the IRS might reduce your refund if it spots a mistake and corrects your return, though that also might result in a larger refund.
On a related note, the Arizona Department of Revenue recently warned that it’s taking longer than usual to cash payments that taxpayers submit using paper checks. The agency said it’s taking up to 10 weeks or so to process payments made by check, and it requested that taxpayers not call in during that time.
Taxpayers won’t accrue late-payment penalties for payments postmarked by the due date, even if checks aren’t cashed promptly.
Not everyone needs to file a tax return
If your income is sufficiently low, filing is optional, though you still might want to do so if you had taxes withheld during the prior year or if you might qualify for the Earned Income Tax Credit or other tax breaks.
Single individuals under age 65 must file if their income in 2022 was at least $12,900, and those 65 or older must file with income at or above $14,700. For married couples below 65, filing is required on income of at least $25,900. If one spouse is 65 or older, filing is required at or above $27,300. If both spouses are 65 or older, the threshold is $28,700.
In Arizona, full- or part-year residents must file a state return if their gross income is greater than $12,950 (single), $19,400 (head of household) or $25,900 (married filing jointly).
Tax help is available after the filing season ends
Many places offer ongoing tax help, as for people who filed an extension request and need to complete a return. Some of the options include VITA or Volunteer Income Tax Assistance, TCE or Tax Counseling for the Elderly and AARP Tax-Aide. Contact information, eligibility limits and other details about those programs can be seen at irs.gov.
If you need to speak to an IRS representative in person, the agency will offer free walk-in service on Saturday, May 13, from 9 a.m. to 4 p.m. at its Phoenix office at 4141 N. Central Ave. Otherwise, you must make an appointment for in-person assistance, either at that IRS office or others in Mesa and Glendale.
Call 1-844-545-5640 to make an appointment. For Arizona-return assistance, send an email to [email protected].
Reach the writer at [email protected].