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Taxes due April 18. What to know before deadline

April 18, 2023

The time for procrastinating is over. It’s time to file your taxes.

April 18 marks the deadline for taxpayers to file their annual returns. Tax Day is typically April 15, but because that date falls on a Saturday, and due to a Washington, D.C. holiday on Monday, the filing deadline was pushed to April 18.

As of April 7, the Internal Revenue Service has processed more than 101 million returns. The average refund to taxpayers is $2,878, down from $3,175 at the same time a year earlier.

The lower refunds are partially attributed to the elimination of key credits available to taxpayers last tax season.

Here’s everything you need to know if you still haven’t filed your taxes:

When are taxes due?

Taxes are due by April 18 since April 15 falls on a Saturday and Emancipation Day, a holiday observed in Washington, D.C., is April 17.

– Elisabeth Buchwald

What happens if you don’t file taxes on time?

Taxpayers who don’t file by the deadline face hefty penalties. According to the IRS, the “Failure to File” penalty is 5% of unpaid taxes for each month you don’t pay, but it won’t exceed 25%. And that doesn’t count any additional state penalties.

If you fail to pay taxes on time, the penalty is 0.05% of unpaid taxes for each month you don’t pay, with a 25% cap.

What is the tax year deadline for IRA contributions?

Along with tax filing and first quarter estimated tax payments, Tuesday’s also the last call to contribute to your IRA for a 2022 tax deduction unless you live in an area that was granted a filing extension by the IRS.

Total combined contributions for both traditional and Roth IRAs are capped at the smaller of $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year, the IRS said.

Filers may also add funds to their health savings account (HSA), if they are eligible for one, to count toward 2022. In both instances, just make sure you mark your contributions for the 2022 tax year.

–Medora Lee

What triggers an IRS audit?

When you’re audited by the IRS, it means your return was selected from a batch of returns for a closer inspection. Sometimes returns are selected at random for a closer review.

A lot of audit notices the IRS sends are automatically triggered if, for instance, your W-2 income tax form indicates you earned more than what you reported on your return, said Erin Collins, National Taxpayer Advocate at the Taxpayer Advocate Service division of the IRS.

That’s why Collins recommends taxpayers ensure the income they report on their returns is consistent with the income that’s stated in official income tax documents like a 1099 or W-2.

In terms of income levels, the IRS in recent years has audited taxpayers with incomes below $25,000 and above $500,000 at higher-than-average rates, according to government data.

– Elisabeth Buchwald

Triple check your work to avoid common mistakes that’ll delay processing

When you’re in a rush to finish your taxes, it’s easy to make a mistake.

Even what seem like small mistakes such as Social Security Numbers not matching with what the IRS has on file; missing or incorrect the Identity Protection PIN for the taxpayer or spouse; employee identification numbers on W-2s not matching what’s in the database; selecting the wrong filing status; including the wrong bank information for direct deposit; miscalculating your math will delay processing your return, said Mark Steber, Jackson Hewitt chief tax officer.

“Also, make sure you sign your return before sending,” said financial advisor and professional tax preparer Rob Burnette of Outlook Financial Center. An unsigned tax return isn’t valid, the IRS says.

–Medora Lee

What is the penalty for mistakes?

An Accuracy-Related Penalty applies if you underpay the tax required to be shown on your return.

There are 2 common Accuracy-Related Penalties to individuals:

Negligence or Disregard of the Rules or Regulations: when you don’t make a reasonable attempt to follow the tax laws when you prepare your tax return or carelessly, recklessly or intentionally ignored the tax rules or regulations. The penalty is 20% of the portion of the underpayment of tax that happened because of negligence or disregard.
Substantial Understatement of Income Tax: if you understate your tax liability by 10% of the tax required to be shown on your tax return or $5,000, whichever is greater. The penalty is 20% of the portion of the underpayment of tax that was understated on the return.

–Medora Lee

Is the IRS taxing the California middle class tax refund (MCTR)?

Twenty-one states, including California, issued special payments to their citizens last year. The IRS said most of these payments don’t need to be reported on 2022 tax returns.

People in the following states do not need to report these state payments: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Alaska also is included in this group, but the IRS notes that state’s annual payment of Alaska’s Permanent Fund Dividend and any payments from states provided as compensation to workers will be included in income.

People in Georgia, Massachusetts, South Carolina and Virginia also will not include state payments in income for federal tax purposes if they meet certain requirements.

–Medora Lee

Is California Franchise Tax Board (FTB) middle-class tax refund taxable?

No, the FTB said those who received this payment don’t need to claim the money as income on California income tax returns.

The IRS also said the federal government won’t tax that money.

–Medora Lee

How to set up a federal tax payment plan with the IRS?

If you discover you don’t have enough cash to pay your tax bill, the IRS offers various payment plans. You can apply for a payment plan online to pay off your balance over time.

Once you complete your online application you will receive immediate notification of whether your payment plan has been approved, the IRS said.

You’ll need to create an account with ID.me, photo identification and balance due.

When deciding which payment plan is right for you, “it is important to consider how quickly you can pay off your balance,” said Mark Jaeger, VP of tax operations at TaxAct. “Installment agreements vary based on the amount owed and the time it’ll take for you to pay it off.” There may also be a fee to set up a plan and you’ll still be on the hook for late-payment penalties and interest.

Payment plans are “a better option than even choosing to pay your bill with a credit card considering the typically high monthly interest rates that come with credit cards,” Jaeger said.