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If you haven’t filed your taxes, there are four weeks left until the federal deadline, which is April 18 for most Americans.
Some 63.5 million payers have sent returns through March 11, according to the latest IRS filing data, with an average refund of $3,352. However, millions of Americans have yet to file.
“They kind of go into avoidance mode, especially if they think they might have money,” said Phyllis Jo Kubey, certified financial planner and president of the New York State Society of Enrolled Agents in New York. . “And I think that’s absolutely the worst strategy.”
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In fact, a third of Americans delay filing their taxes, according to a survey since IPX 1031.
Even if you owe money, it is essential to file your return on time or file for an extension to avoid the penalty for failure to produce, or 5% of unpaid taxes for each month until filing, capped at 25%. By comparison, the non-payment fee is 0.5% per month, more interests.
Although an extension prevents the penalty for failing to file, you will still need to pay taxes due before April 18 to avoid additional penalties and interest, Kubey explained.
Filing quickly can also unlock options for your unpaid taxes, such as a long-term payment plan, known as installment agreementif you owe $50,000 or less in taxes, penalties and interest.
“It has become much easier to deal with the IRS in terms of collection activity,” she added. “There are great tools for setting up installment payments online.”
With the many changes to tax laws in the pandemic era, it has become increasingly difficult for individuals and businesses to file an accurate and timely return.
“The demand for professional tax services may be higher than ever,” said Bryan Hasling, CFP and partner at Lodestar Private Asset Management in Alamo, Calif.
If you still need advice, it can become difficult to find a tax preparer as the deadline approaches. And asking for help filing an extension just before the deadline may incur a surcharge.
“I think people are taken aback by that,” Hasling said. “But it’s the busiest time of the year.”
However, if you prepare your tax return yourself, it is essential to file it electronically with direct deposit and triple check for errors to minimize delays.
For example, the The IRS has urged filers Pay particular attention to reconciling stimulus checks and child tax credit advance payments. Simple errors may require manual review, sending your statement to the agency backlog.
According to Hasling, it’s also easy to get the wrong answer to the “virtual currency” question on the front page of your tax return. Theirs recently shared tips regarding cryptocurrency and taxes.
The question reads: “At any time in 2021, have you received, sold, traded, or otherwise disposed of any virtual currency?”
Although it is not necessary to check the “yes” box on the form to buy cryptocurrency with US dollars, you will need to do so if you have sold, traded, mined assets, or used digital currency for purchases.