Tax season officially commences on Monday, marking the IRS’s commencement of accepting and processing 2023 tax returns.
The majority of taxpayers are required to submit their returns or request an extension by Monday, April 15. However, exceptions exist, with residents of Maine or Massachusetts having until April 17 due to state holidays. Individuals in federally declared disaster areas may also be granted additional filing time.
To request an extension, individuals can utilize the IRS “Free File” tool to complete Form 4868 online. Ensure submission by the tax-filing deadline or print the form, mailing it to the IRS address for your state, with a postmark no later than April 15.
Upon filing the extension, you’re granted until October 15, 2024, to complete your tax filing.
Nevertheless, there are advantages and disadvantages associated with seeking an extension. This option provides filers with additional time to meticulously review their returns, maximizing opportunities for tax benefits such as various deductions and credits that can reduce their liability.
Postponing the filing date also helps avoid a failure-to-file penalty, amounting to an additional 5% per month on the unpaid taxes, potentially accumulating to 25% of the tax due. Choosing an extension extends the deadline to October 15, preventing the penalty from accruing before that date.
It’s crucial to note that opting for an extension doesn’t translate to a delay in settling owed taxes to the government, as experts emphasize the importance of timely payment.
“Extensions are a good tool to give you an extra six months,” Eric Bronnenkant, head of tax at online financial adviser Betterment, told FOX Business. “However, know they are not a free lunch to defer payments.”
Typically, the majority of taxpayers anticipate receiving a refund from the government.
For many households, this refund can be significant. In 2023, nearly three-quarters of filers received a tax refund, with an average payment amounting to approximately $3,176.
To ensure a swift refund within 21 days of filing, the IRS emphasizes the importance of electronically filing an accurate and complete return, accompanied by a direct deposit refund request.
Anticipating over 128.7 million individual tax returns by this year’s deadline, the IRS cautions that certain returns may undergo “additional review,” potentially prolonging the processing time due to identified errors, mistakes, or suspicion of theft or fraud.
“Once you’re relatively certain that you have all of your tax documents, file as soon as you can so that you can start investing your money,” Bronnenkant said. “Because, in general, the IRS doesn’t pay you interest on your refunds. So getting that money in your hands sooner is better for sure.”
Taxpayers can track their refund using the IRS’ “Check My Refund Status” tool.
Upon submitting your details, you can track your return’s receipt, approval, and delivery status with the IRS.
This information becomes accessible 24 hours after electronically filing your taxes or four weeks after submitting a paper return. To utilize the tool, you’ll need your Social Security number, filing status, and exact refund amount.
Early taxpayers seeking the earned income tax credit or the child tax credit should be aware of a potential delay. The IRS cannot issue refunds for these credits before mid-February.
Notably, the IRS delayed a controversial tax reporting requirement in November, specifically targeting Americans who earned more than $600 online through third-party payment apps like Venmo or PayPal.
Approved by Democrats in March 2021 through the American Rescue Plan, the rule change mandated payment platforms like Venmo, PayPal, Etsy, and Airbnb to submit Form 1099-K to the IRS and users if their transactions surpassed $600 annually.
However, the IRS has opted for 2023 as an “additional transition year.” During this period, payment apps won’t be obligated to send Form 1099-K unless users’ gross income exceeded $20,000 or they conducted 200 separate transactions within a calendar year. Starting in 2024, the minimum reporting threshold will be raised to $5,000.
