Tax season may be over for most American taxpayers. But it’s just beginning for people who filed six-month extensions.
The same people
Tax procrastinators aren’t a big group. Just 4 percent of those answering a tax-time survey by TechBargains.com said they planned to seek a six-month extension of the April 18 IRS deadline. But these folks tend to be consistent: If someone is filing late this year, the chances are they’ve been late before, experts say.
“It’s the same people every year,” a tax specialist tells Accounting Web, an online community for CPAs.
One procrastinator is Marc, a recent college graduate who works as an independent contractor for financial services companies. Since procrastinating can appear unprofessional, he agreed to talk about his situation giving his first name only.
When we spoke by phone in mid-May, Marc still had not filed — or prepared — his 2015 federal taxes.
“I guessed on what I should pay the government (and most likely overpaid). I miss almost all my quarterly taxes and just pay the penalty,” he said.
Marc has been filing late for several years. Tax preparation is daunting, and, he notes: “It’s not a skill you learn in high school or college.”
People who file extensions “have more complex finances, on average,” according to the IRS.
Marc’s finances may not be complex, but his tax preparation is. He is forced to track down some of the 1099 income-reporting forms that clients should have mailed to him, he says. “I have to call like 10 different companies for 10 different 1099s.”
It is difficult for those who file on time to understand why someone would procrastinate filing taxes, a predictable and inescapable obligation. And Marc’s embarrassment is made worse because he also is involved in a business partnership, and his tax delays are causing problems for his partners.
They are becoming impatient.
“They harass me on reporting the expenses to our accountant on time so their Schedule K-1s (an IRS form used to report the income and deductions from a partnership) can be released,” he says. The stress is agonizing, he says.
Perfectionism and other causes
Perfectionism is another common reason for procrastinating. Odd as it may seem, perfectionists find it safer to delay doing a tough job than tackle it and risk making mistakes, Arthur J. Bangs, a licensed psychologist and professor of education at Philadelphia’s La Salle University, tells Bankrate.com.
Bangs teaches workshops for procrastinators and he sees several familiar traits among them:
- Procrastinators tend to tackle easy jobs first, pushing more difficult stuff to the back of the queue.
- Some procrastinators can’t complete assignments because of a need to resist authority.
- Others wait until the eleventh hour feeling that they work better under pressure.
Delays in filing your taxes can be expensive. Taxpayers who submitted paperwork late to accountants or filed an extension paid about a third more — $160.56, on average — than the $106.20 spent on average by people filing in January or February, the TechBargains survey found.
Although a six-month extension gives tax filers more time to complete and submit their the paperwork, they still must pay what they owe by the April deadline or face a fine plus interest on the unpaid balance.
Fail to file the extension and you’ll owe a late filing fee in addition.
According to this IRS article on late filing rules and penalties:
The penalty for filing late is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. That penalty starts accruing the day after the tax filing due date and will not exceed 25 percent of your unpaid taxes.
What’s more …
If you timely requested an extension of time to file your individual income tax return and paid at least 90 percent of the taxes you owe with your request, you may not face a failure-to-pay penalty. However, you must pay any remaining balance by the extended due date.
The motivation you may be missing
For those who still are having trouble getting their taxes filed, here are four powerful reasons to get moving:
- Money: The average refund check is around $2,700, the IRS says. Wouldn’t that be nice to have in your pocket right now?
- If you are self-employed, your income is not credited with Social Security if you don’t file. That could diminish the amount you can collect in retirement.
- Failing to file can stop you from applying for a mortgage loan or financial aid, since applicants must product copies of current tax statements.
- If you wait too long, the IRS may even file your taxes for you. That’s called a “Substitute for Return.” The tax agency doesn’t say how long it waits to do this. But it says it will let you know if it happens. That may sound fine, but there’s a downside: the IRS will use only the information it has for you — annual income data from an employer, for instance. “The IRS will not include any credits or deductions which could help offset what may be a tax liability,” says lawyer Jesse Seaman, Managing Licensed Tax Professional at Tax Defense Network, a Florida-based company of tax attorneys.
Looking for more motivation and information for getting late taxes done? Money Talks News has plenty. Check out:
- 12 Ways to Bust Through Procrastination and Get Stuff Done
- 10 Things You’re Procrastinating About, and How to Get Them Done
- 13 Apps That Destroy Bad Habits and Create Good Ones
What are your experiences and insights on late-filing taxes? Share in comments below or on our Facebook page.