Your Tax Return Is Due October 15

Relax with a walk on a beach in Hawaii knowing your tax return is due October 15.

April 15 is a date that looms large.  After all, it is Jackie Robinson Day—but for tax purposes, it is just any other day.  Your tax return does not have to be filed until October 15 to be on time.  

While the Internal Revenue Code sets April 15 as the due date for filing your personal income tax return, it also allows the IRS to grant a six-month extension.  IRS regulations specify that individuals will receive a six-month extension by filing an extension application on Form 4868 (or “in any other manner” that the IRS allows) by April 15.  

• We previously wrote about how to obtain an extension here.  You can print and mail Form 4868, use IRS Free File to electronically request an extension, make a payment towards your expected balance due (select the “extension payment” option), electronically request an extension using your chosen software, or ask your tax professional to file the extension on your behalf.  

• I strongly suggest using an electronic method to obtain your extension.  Be sure to save the confirmation notice showing the date and time with your tax records.  

• While some states honor any federal extension that is in place, many still require a separate extension.  Do not forget about your state filing(s)!

Filing later is actually good for you.  

Despite the simplicity of bumping your filing deadline to October 15, folks still often experience a mental block when it comes to filing during the summer months.  

A common misconception is that filing an extension puts you on the IRS’s radar and increases your chances of being audited.  That is simply not true.  The IRS does not care if you file during the extension period—just file by October 15, report all sources of income, and keep good records.  

Submitting an accurate tax return by October 15 is preferable to hastily submitting one on April 15.  If you want to be audited, leave off a W-2, forget to report your freelance income, or estimate the numbers for your K-1 instead of waiting for it to arrive.  Income mismatches are the number one audit trigger for the IRS.  If you prefer to stay out of the IRS’s crosshairs, file an accurate tax return.  Particularly if your return is more complicated, filing your tax return later in the year is beneficial.  There are two main reasons for this:

First, you will be sure to receive full and accurate documentation from all income sources, IRA contributions, and investments.  Every year I have a handful of clients that reach out to me a few weeks after filing their return because they forgot about a side job they had briefly or did not realize their investments were set up as multiple accounts with separate reporting.  Additionally, some investments do not provide their annual tax information until the summertime.  I also have several clients that receive only estimates from their investment custodians in March while final numbers do not arrive until August.  You can use the estimates to figure out your extension payment (more on that below), but you are better off filing with the final numbers versus needing to amend your return later to correct your initial filing.  

Second, even if you have all your tax documents early, filing later in the year gives both you and your tax professional more time to build a quality product.  Instead of rushing to beat an arbitrary April 15 deadline, you can coast through the summer when you are less frazzled.  Slowing down gives you more time, focus, and energy, and a better chance of avoiding mistakes.  

• This is a big reason why Phippen Tax has pivoted to a scheduling system for tax returns.  We will be able to provide higher quality service by focusing on a limited number of tax returns at a time.  Scheduling tax returns also provides increased transparency surrounding completion dates—our clients no longer need to wonder when their tax returns will be done, because they know when signing up for a document delivery date! 

For self-employed individuals, there is a third reason that filing later can be beneficial:  The deadline to contribute to a self-employed retirement plan is often the due date of your tax return.  

Filing later does not cost you more.

Folks are understandably concerned about paying more when filing later.  That does not have to be the case.

If you do not owe any taxes, there are absolutely no financial penalties for going on extension and filing your taxes between April 15 and October 15.  If you are expecting a refund, you will still receive your full refund whenever you file your taxes.  Going on extension is your only action step before April 15.

If you expect to owe money, you have one additional step.  You have probably heard the refrain that an extension of time to file is not an extension of time to pay.  An extension resets your personal filing deadline to October 15, but your payment deadline for any taxes you owe remains April 15.  If you have a refund, this is irrelevant, but if you owe taxes, late-payment penalties and interest get backdated to April 15.  Going on extension when you owe money avoids late-filing penalties, but it can lead to late-payment penalties and interest.

Want a simple way to avoid those late-payment penalties and interest?  Pay what you will owe by April 15.  Making an extension payment also doubles as your extension request!  Even if you cannot pay the full amount that you expect to owe, pay what you can by April 15 to minimize late-payment charges.  

This does mean you have to estimate what you will owe by April 15.  If your income sources are relatively stable year-to-year, look at your results from last year.  All else being equal, if you made the same amount of money and paid the same amount of taxes (through withholding and/or estimated payments), then you will have the same refund or balance due.  (The slight differences in the tax bracket cut points from year-to-year work in your favor, so ignore them for purposes of estimating your results to give you an additional cushion.)  Use that to determine whether you need to make an extension payment.  

• If you had a $2,400 refund last year, and your income and withholdings are similar, you can reasonably expect a similar result.  There is no need to make an extension payment if you have already overpaid your taxes.  

• If you instead owed $4,800 last year, and your income and withholdings are similar, you can likewise reasonably expect a similar result.  In this scenario I would advise a $5,000 extension payment.  The estimated payment prevents any late-payment penalties, and any excess payments will be refunded when you file your tax return.  

• Assume instead that last year you received an $1,100 refund, but your income was $30,000 higher this year, you paid $4,500 more in taxes, and you are in the 24% marginal tax bracket.  Here is the math:

  • Additional tax liability = $30,000 higher income ✖ 24% = $7,200 additional tax

  • Results difference = $7,200 additional tax – $4,500 additional payments = $2,700 additional owed

  • Anticipated result = $2,700 additional owed – $1,100 refund = $1,600 expected balance due

  • Here, I would advise you to make a $2,000 extension payment (providing an extra $400 cushion to be safe, knowing any excess will be refunded when you file your tax return).  

If your income is more variable, the concept—estimating your results—is still the same; you would simply start from the beginning of your return rather than the end.  If you are a Phippen Tax client with significant changes to your income since last year, we can help you calculate an estimated payment upon request. 

Key reminders

Remember to do the math, and file an extension application, for your state return as well.

Business returns are on a slightly different schedule.  File your business extension application by March 15 to move your filing deadline for the year to September 15.  

Even if you are not in a position to pay your expected balance due, file an extension application.  You will have late-payment charges anyway, but the extension gets you out of late-filing penalties, which are significantly worse.  

If you are not sure whether you will “beat” the April 15 deadline, file an extension application anyway.  A $1 extension payment takes only a few minutes, and any extension payment gets credited towards your taxes and either reduces your balance due or increases your refund.  

How are we handling this?

At Phippen Tax, we are scheduling tax returns this year.  When signing up, folks already know when their tax return will be completed.  We will automatically file extensions for all of our clients whose personal returns will be completed after April 15 (and business returns after March 15) at no extra cost, and are available to assist those folks in estimating extension payments upon request.  By spreading out when we do this work instead of racing through as much as we can in the first few months, we will submit the highest quality tax returns.  

That is why I prefer to finish my own tax return in October.  One of the last tax returns I do every year is my own.  We have documents that do not arrive until late March, and I would rather have the focus to complete my taxes accurately than rushing to get them done.  Everyone deserves that same attention to detail.