The deadline is approaching if you applied for an automatic extension to file your 2022 tax returns. If there is or will be a balance due, then filing for an extension avoids the ‘failure to file’ penalty; however, the ‘failure to pay’ fine still applies. 90% of the expected balance due must be paid by the original due date in April to avoid such penalties. If you expect a refund, you have three years to file, and no application for an extension is necessary if you don’t file (but only if you expect a refund). The tax year 2020 must be filed by the October 2023 deadline to receive a refund, if there is one. Otherwise, it is forfeited.
Here are five things you should do to file your tax returns before the extension deadline:
- Gather all your necessary tax documents, such as W-2s, 1098s, 1099s, and Financial Statements for businesses. If you are not preparing and filing your tax returns, send all necessary information to the person who prepares your tax returns. As a preparer, I ask clients to keep receipts at home and only send totals to me.
2. Determine which tax forms you must complete based on your income and deductions. A tax professional will guide you, but it’s extremely important that you understand the basics. You should understand the standard deduction, itemized deductions, and which deduction benefits you (not your neighbor, sibling, or friend) – your situation is different than anyone else’s.
3. Double-check all your calculations and ensure you’ve filled out every section of the forms accurately. Your tax return preparer will or should send you a copy for review before e-filing. It is still your responsibility to ensure the correctness of the return, even if you hire a preparer to help with drafting and submitting the forms.
4. Submit your tax returns. Typically, they will be e-filed regardless of whether you prepare them yourself or hire a tax return preparer or accountant.
5. Keep a copy of your tax returns and all supporting documents for your records.
Taxes are an indefinite ongoing task, and it might be helpful to create a folder specifically for tax stuff where you can save documents and tax return copies year after year. Every year is separate, so create a new folder every year within your ‘tax’ folder.