Risks and Benefits of Waiting To File Taxes at the Deadline
With tax season entering its third month, the earliest birds have already filed and are spending their refunds. If you’re not among them, don’t worry. There’s still time to submit your returns with plenty of days to spare — and many people plan to do exactly that.
According to a new GOBankingRates survey of more than 1,000 people, about two out of three taxpayers expect to file well before the April 18 deadline — but many others will run out the clock until the bitter end.
More than one-quarter plan to file the week of Tax Day or even on the day of the deadline itself. Another 6% will kick the can even farther down the road and seek an extension to stretch tax season out into the fall.
The truth is, there’s no one right or wrong strategy — waiting comes with pros and cons. Here’s what you need to know.
The Longer You Wait, the More Time You Have To Get It Right
There aren’t many strong arguments against filing early — if you have all your ducks in a row. But if you jump the gun and submit your returns while crucial paperwork is still trickling in, you’ll probably wind up wishing you had exercised some patience.
“If you’re still waiting on required documents such as a K-1 or 1099, it’s a good thing to wait until the deadline and you may even want to file for an extension,” said Chris Alman, CFP, CEPA and founder and lead advisor of Equip Financial Partners. “These forms are crucial to making sure you file correctly. If you file without them, you may end up needing to file an amended return, which will cost you more money.”
Fear-Based Procrastination Only Makes Things Worse
As Alman noted, delaying with a purpose can serve you well. The IRS doesn’t like do-overs, and filling out Form 1040X to submit an amended return because you filed prematurely will probably cost you money and certainly cost you time and stress.
That said, if you’re delaying to put off some unpleasant inevitability, it’s better to rip off the band-aid.
“If you’re waiting until the deadline to file your tax return because you know you owe money, or you think you’re getting some benefit out of waiting like keeping the money you owe in your pocket one more day instead of Uncle Sam’s, it can be a mistake to wait,” Alman said.
The anxiety you’re feeling about filing — over money or anything else — will only get worse as the clock starts winding down. And as the time until the deadline dwindles, so, too, do your options.
Filing at the Deadline Denies You Time To Plan
If you are worried about a tax bill you can’t pay, you’re hardly alone.
Not having enough money to keep the IRS at bay is the No. 1 tax concern for about 13% of the study’s respondents — but they have more incentive to file quickly than just about anyone else. The sooner they get it done, the sooner they’ll know the exact dollar figure of what they owe. Then, they can start planning for the payment deadline, which is April 18 no matter when you submit your returns.
Whether you take out a personal loan, borrow money from family members or sell your old baseball cards online to settle your bill, it can take time to drum up cash. If you wait until the deadline, you might be stuck with credit cards as your only option — and putting it off until the last minute invites unforeseen stresses, in general.
For example, if you wait until Tax Day, you won’t have time to change software providers if you realize there’s a better option after you get started. But whatever you do, don’t delay based on tax season mythology.
“Some perceive that waiting until the last minute reduces their chances of being audited, which is not true,” said Lee Reams Sr., co-founder of TaxBuzz. “There are no risks to filing last minute if e-filing.”
There Is No Extension for Paying Up
There’s a common misconception that if the finish line approaches too quickly, you can always put off the inevitable until fall.
For paperwork, yes. For payment, no.
The IRS is generous with granting six-month extensions, which in 2023 gives you until Oct. 16 — but only to file your returns.
“If you owe taxes, you still need to make an estimated payment by the filing deadline,” Alman said. “An extension doesn’t give you extra time to pay, so you could potentially face penalties.”
More From GOBankingRates
- Side Gig: Earn Up To $200/Hour With This Easy-To-Start Job, No College Degree Required
- How To Get Free Money: 13 Proven Ways
- 3 Things You Must Do When Your Savings Reach $50,000
- 5 Ways To Elevate Your Finances Daily
