US taxpayers who requested an extension for filing their taxes have been reminded that the October 15 deadline is fast approaching. While COVID-19 saw the usual April end to the tax year delayed by three months this year, the option to ask the Internal Revenue Service (IRS) for a further extension to file still remained.
Now, however, the deadline for extenders is just a week away, leaving late filers with limited time to meet their obligations to the IRS. The service has reminded people wondering how to file taxes of the different options on offer, including those on its own website and the best tax software. However, with time slipping quickly away, getting started now is a must.
How to file taxes
While the clock may be against you, taxpayers still have many different ways in which to file their taxes. While mailing a paper return is an option, the IRS warns this is taking six to eight weeks to process. As a result, the IRS is actively urging people to file electronically so as to support social distancing efforts and to ensure the fast processing of tax returns, refunds and payments. Here are the electronic filing options that are available:
- For those with income of less than $69,000, the IRS Free File tool can help you find free tax software that won’t cost you anything. With this option, you get guided help with filing too.
- If your income is more than $69,000, and you’re comfortable preparing your taxes on your own, the IRS website also has free electronic forms that you fill out and file yourself.
- Anyone can use commercial tax software, whose sole aim is to assist in the preparation and filing of taxes. If your taxes are straightforward, most of these packages offer basic versions that are free as well.
- If your situation is more complex, then finding a tax pro who is an authorized IRS e-File provider is probably your best option.
- For members of the military or qualified veterans, there is the option to file for free online using MilTax.
What is the fastest way to get a tax refund?
If you’re expecting a tax refund after filing - and most people will get money back - the IRS says choosing the direct deposit option, so that monies are electronically deposited into a bank account, will ensure the speediest return of your funds. This method allows for any refund to be paid into one, two or even three accounts, and is always much quicker than waiting for a paper check to arrive in the mail. The faster delivery of refunds via direct deposit is also especially useful if you're currently struggling financially, and trying to stave off the need to use the best personal loans or credit cards to get by.
Does the tax deadline apply to everyone?
While most taxpayers should file their tax returns on or before October 15, some people may have more time. They include:
- Members of the military and others serving in a combat zone, who typically have 180 days after they leave the combat zone to file returns and pay any taxes due.
- Those in federally declared disaster areas who already had valid extensions, details of which can be found on the IRS website.
Are there penalties if you don't file taxes?
If you don’t file in time, a failure-to-file penalty might come your way. This will usually be equivalent to 5% of your unpaid taxes for every month your tax return is late, up to five months. And if you’re more than 60 days late, you can expect to pay the lesser of all the tax that you owe or “a specific dollar amount that is adjusted annually for inflation”, which is currently $435.
What if I can’t pay my taxes?
Americans can make their federal tax payments online, by phone or with their mobile device and the IRS2Go app. However, failure to stump up what you owe will usually result in penalties and interest.
If you’re struggling to raise the funds to pay the full amount, contact the IRS to find out what your options might be. Putting an installment agreement in place might be one way of providing more time to pay what you owe, and may result in smaller penalties. While interest and late-payment penalties continue to build on unpaid taxes, the failure to pay tax penalty rate of 0.5% is cut in half while an installment agreement is in effect. For the calendar quarter beginning October 1, the interest rate for underpayment is 3%.
With the October 15 deadline so close, making use of tax software is probably your best chance of filing in time. Such packages offer all the tools and support needed to file quickly, and can help reduce the number of tax-filing mistakes that are made.