Tax time is quickly approaching and I’m sure many of you who were scheduled to receive a refund have already filed and even cashed the check. For those of us who owe money this year the deadline that is looming is not going away. So if
the filing deadline is the 16th the filing deadline is the 17th what does that really mean for filing and submitting payment? [Thanks to a comment by Q to remind me it is actually the 17th this year due to a DC holiday]
The good news is that a tax return delivered to the IRS by U.S. mail after the due date for the tax return is considered timely filed if the tax return was postmarked on or before the due date of the tax return. This is good news because that means you don’t have to submit your filing and payment a week in advance just to be sure it is in their hands by the deadline. So if you want you can actually wait until the 17th to get everything in the mail provided the postmark on the envelope shows the 17th.
One thing to consider is that if your mailing was postmarked for the 18th and later received by the IRS on the 21st, the IRS would log that as being filed on the date received, or the 21st. So while you can wait until the very last day to do so I would recommend still mailing a day or two early just to be safe in the event of something coming up that doesn’t permit you to get to the post office or meet the last postal pickup for that day in order to get that day’s postmark.
What About Extensions?
If you filed an extension you are not off the hook. This extension is simply for filing the paperwork, not the tax payments you owe. If you have waited this long and still don’t know roughly how much you will owe I urge you to find out as soon as possible. You will still need to have your payment, or at least an estimated payment postmarked by the 17th in order to be considered as on time even if you have filed an extension or plan to file one.
The extension will at least prevent you from receiving a late filing penalty on your paperwork but interest will be charged on unpaid tax from the original due date of the tax return. So it is important to send at least an estimated payment before the deadline even if you have filed for an extension so you can avoid as much interest as possible.
On top of interest there is an issue with late payment penalties as well. This means it is very important to know fairly well how much your payment will be. The IRS will not impose a late payment penalty so long as the estimated payment you send is at least 90% of the actual payment you owe and that the remainder of the payment is submitted before the end of the extension deadline. So if you expect your tax payment to be around $1,000 don’t send them a check for $200 as an estimated payment while you continue to work on your return in the extension period.
What Can You do to Avoid This Problem Next Year?
If you are employed the first plan of attack is to adjust your tax withholding. This is done via form W-4 which you should get from your employer and alert them of the change. I talked at length about how to calculate and update your withholdings earlier this year.
If you are self-employed or already file quarterly estimated taxes then it is up to you to make sure you are putting enough money aside to make the appropriate payments each quarter so you aren’t stuck with a bill at the end of the year. Understandably this can be difficult to do when you have income that fluctuates so the best you can do is estimate what you will owe to the best of your ability. If possible try to withhold a bit more than you think you may need to so that any unexpected changes in income or expenses later in the year won’t throw you off. Worst case is you will get a refund.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.