For most, filing taxes belongs in the same category as visiting the dentist and standing in line at the DMV. It’s something we know we have to do, but we certainly don’t look forward to it.
Maybe that’s why 20% to 25% of all Americans wait until the last two weeks before the April 15 deadline to prepare their tax returns, according to the IRS.
If the tax-filing deadline is approaching and you still haven’t completed your return, you can either scramble to get it done or file an extension. Here’s what you should know about each option and which one is best for your situation.
Filing your taxes ASAP
Rushing to complete your tax return increases the chances of making errors or missing out on valuable write-offs. Though you may be in a hurry, taking a methodical approach to doing your taxes can help minimize that risk.
To streamline the process, your first step should be gathering all the documentation you’ll need to complete your return. That may include your W-2, 1099s, receipts and more, depending on your tax situation.
One of the biggest questions that will impact the amount of paperwork you need to track down is whether you plan to take the standard deduction or itemize your taxes, according to Corey Hulstein, a certified public accountant and director of tax at Modern Wealth Management.
“That’s the one I think people either spend way too much time on or not nearly enough time on,” he said.
In many cases, it’s probably safe to claim the standard deduction, which is $13,850 for 2023 for single filers and $27,700 for married couples filing jointly.
“The question you have to ask yourself is: Is it worth me gathering all this information together if I’m likely not going to get any federal benefit?” Hulstein said. The answer is “probably not,” unless you itemized in the recent past or experienced a major life change, such as purchasing a home.
Hulstein said it’s a good idea to perform a general sanity check as you complete your return by grabbing last year’s filing for comparison. You can then examine the numbers from 2022 versus 2023 and ensure there aren’t any major inconsistencies.
“It’s an added step,” Hulstein said, “but it’s just good to double-check yourself when you’re feeling stressed and like you’re up against the deadline.”
Should you file an extension?
If filing your taxes before April 15 isn’t looking realistic, you may want to consider filing an extension instead. Hulstein said that if you haven’t started tackling your taxes by early April, it’s probably a good idea to file an extension rather than risk submitting an incorrect return.
You can use the IRS Free File tool to request an automatic extension, which gives you until Oct. 15 to file. Illinois grants an automatic six-month extension to file an IL-1040. More details can be found at MyTax Illinois.
However, it’s important to understand that while an extension gives you an additional six months to file your tax return, your tax bill is still due by April 15. So if you think you’re going to owe this year, you should be prepared to pay that amount. Hulstein recommends adding a $500 buffer to your estimate, if possible, to avoid underpaying and incurring penalties.
What if you can’t afford your tax bill?
If you owe the IRS but don’t have the cash to cover the full amount by the deadline, don’t put off filing or wait to pay. The IRS imposes a penalty of 0.5% of the unpaid amount for every month it’s late, up to a maximum of 25%.
“At that point, you probably need to reach out to the IRS and set up some type of payment plan,” Hulstein said. “They usually are fairly flexible on working with people to make sure those taxes get paid.”
Payment plans are available to those who can pay their taxes in full on an extended timeline. For short-term plans, the repayment term is either 90 days or 180 days. If you need more time, the IRS will ask how much you can reasonably afford to pay each month and put you on a long-term installment plan. However, you must have the balance paid off within 72 months.
If your request for a payment plan is approved, you may need to pay a modest setup fee. You will also accrue penalties and interest on the unpaid balance, so it’s important to repay your taxes as quickly as possible. Hulstein said it’s crucial to stay on top of those payments, as missing them may void the plan.
