Tax Day is Here: Essential Tips for Those Who Haven’t Filed Yet and for Those Who Have

Editor’s Note: This is a revised version of a story that first appeared on April 14, 2023.

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It’s April 18, marking the final day to submit your federal and state income tax returns for 2022. (Coincidentally, it’s also National Animal Crackers Day for those who observe it.)

Regardless of whether you’ve already submitted your tax return or are still in the process, the bright side is this tax season has been significantly smoother compared to the last three, which were affected by the pandemic.

“This is the first tax season since 2019 when the IRS and the country have been operating normally,” IRS Commissioner Danny Werfel stated during a press call.

Werfel mentioned that since January, following an influx of new funding after years of budget cuts, IRS employees have successfully addressed 87% of calls from taxpayers with inquiries. In contrast, they managed to answer fewer than 15% last year, with wait times significantly decreased from 27 minutes last year to just 4 minutes this season.

The IRS has also introduced a range of new online tools for taxpayers, he added.

Remember, not everyone must file by April 18: If you reside in an area declared as a federal disaster zone, have a business there, or have pertinent tax documents held by businesses within that locale, the IRS may have already extended your filing and payment deadlines. Find the specific extension dates for each disaster area here.

Thanks to significant weather events in recent months, for example, tax filers in much of California—responsible for 10% to 15% of federal filings—have been granted an extension until October 16 to both file and pay, as per an IRS representative.

If you are part of the armed forces and are currently or have recently been stationed in a combat zone, you may benefit from an extension of 180 days for filing and payment deadlines on your 2022 taxes. Your specific extended deadlines will depend on your departure date from the combat zone. This IRS publication provides further information.

Lastly, if you earned little to no income last year (generally less than $12,950 for single filers and $25,900 for married couples), you might not be obligated to file a return. However, submitting one could be beneficial if you’re eligible for a refund due to refundable tax credits like the Earned Income Tax Credit. (Utilize this IRS tool to determine if you need to file this year.) You should also qualify to use IRS Free File (designed for those with an adjusted gross income of $73,000 or less), making it free to submit a return.

Your paycheck might not be your sole income source: If you had a full-time job, you may think that’s the only income to report, but it isn’t necessarily the case.

Other potential income sources that are taxable and need reporting include:

Stay organized with your tax documents: By this point, you should have received all necessary tax documents from third parties (such as your employer, bank, brokerage, etc.).

If there’s no record of receiving a physical tax document, check your email and online accounts—an electronic document may have been sent.

Here are some tax forms you may have received:

“Note that there may not be a specific form for some taxable income, like earnings from renting your vacation home; thus, you are responsible for reporting it yourself,” according to the Illinois CPA Society.

One last-minute way to decrease your 2022 tax obligations: If you’re eligible to make a tax-deductible IRA contribution and haven’t done so, you have until April 18 to contribute up to $6,000 ($7,000 if you are 50 or older). This can lower your tax bill while boosting your retirement savings.

Always proofread your return prior to submission: This applies whether using tax software or collaborating with a tax professional.

Minor errors and oversights can lead to delays in processing your return and receiving any refund owed. Avoid typos in your name, birth date, Social Security number, or direct deposit information; incorrect filing statuses (e.g., married vs. single); simple math mistakes; or omitting required fields.

If you can’t file by April 18, here’s what to do: Fill out Form 4868 either electronically or on paper and submit it by April 18. This will grant you an automatic six-month extension for filing.

However, keep in mind that while you can extend the filing period, it does not extend the payment deadline. You will incur interest (currently at 7%) and a penalty for any amount owed for 2022 that is not paid by April 18.

If you believe you owe taxes—perhaps due to outside income where tax wasn’t withheld or significant capital gains last year—estimate how much you owe and remit that payment to the IRS by Tuesday.

You can do this by mailing a check along with your extension request form, ensuring the envelope is postmarked by April 18.

Alternatively, a more efficient option is to pay electronically through IRS.gov, according to CPA Damien Martin, a tax partner at EY. Doing so will negate the need to file Form 4868, as the IRS will automatically process an extension for filing.

If you choose to pay directly from your bank account (which is free), select “extension” and then “tax year 2022” when prompted.

Payments can also be made via credit or debit card; however, a processing fee will apply. This could lead to higher costs if you don’t pay off your card in full monthly, as high interest rates may accrue on outstanding balances.

If you are unable to pay the full amount you owe, the IRS offers various payment plan options. It might also be wise to consult a certified public accountant or an enrolled agent to ensure you’re making the best decision for your situation.

If there are outstanding state income taxes, remember that you may need to undertake a similar process to file for an extension and make payments to your state’s revenue department, Martin advised.

Utilize the IRS interactive tax assistant for any basic inquiries you may have: The IRS features an “interactive tax assistant” designed to assist you with more than 50 fundamental questions related to your income, deductions, credits, and other technical topics.

If you have already filed your return, you are likely relieved to have that task behind you. However, you may still have lingering questions regarding what comes next.

What about my refund? If you are entitled to a refund, the IRS usually processes it within 21 days after they receive your return. When your refund arrives, it may be lower than last year’s, even if your financial situation has remained stable. This reduction might be due to the expiration of several tax breaks tied to Covid-19.

As of now, the average refund issued was $2,878 for the week concluding April 7, down from $3,175 at the same stage in last year’s filing season.

Am I at risk of being audited? The reasons and methods for auditing a taxpayer can differ, and many audits result in “no change,” meaning you typically won’t owe additional taxes. However, audit rates remain exceptionally low for most US tax filers.

For filers earning between $50,000 and $200,000, only 0.1% faced audits in 2020, according to the latest IRS statistics. Audit rates were even lower for high-income filers: just 0.4% for those earning between $1 million and $5 million, 0.7% for incomes between $5 million and $10 million, and 2.4% for income levels exceeding $10 million.

Looking ahead, the IRS commissioner indicated in a recent press call that the agency will utilize funds from the Inflation Reduction Act to enhance its compliance efforts, especially targeting high-income individuals—those earning $400,000 or more. For filers under this income bracket, he does not expect any changes in the likelihood of being audited.