Need extra 6 months to file taxes? Here’s how
There aren’t a lot of automatic things in life, but extra time to file federal, and even state, income-tax returns is one of them.
If you don’t think you can finish up by the April 15 deadline, look into an extension giving you six more months to wrap up, taking you to Oct. 15. Sixmonth federal extensions are free and automatic, no questions asked. You just need to complete a short form, 4868, on the irs.gov website, or mail it in.
If you file an extension, you avoid penalties for filing a late return. However, extensions don’t provide extra time to pay any taxes you owe. You should make a close estimation of your bill and send in any payment due by April 15.
The April 15 Patriots’ Day holiday in Maine and Massachusetts gives residents of those states until April 17 to file. People who live in the District of Columbia have until April 16, owing to a local holiday there.
Similar to federal law, Arizona allows six-month extensions to finish state returns. The relevant Arizona form, 204, must be submitted by April 15, and it too doesn’t grant additional time to pay any taxes owed.
If the IRS already has granted an extension, then you don’t need to request an Arizona extension too, says the state Department of Revenue. Go to the azdor.gov website for details.
Refunds affecting spending
Those who already have filed are seeing slightly smaller refunds hitting their bank accounts, though consumers remain confident and continue to spend.
With roughly two-thirds of all federal tax refunds processed through the end of March, average refund amounts were running a bit below last year’s pace — $2,873 on average for people receiving refunds, down from $2,893 a year ago.
In aggregate terms, that’s about $6 billion less.
But is that enough to derail the economic expansion? Probably not. The National Retail Federation predicts total retail sales will climb between 3.8 percent and 4.4 percent in 2019.
While that would be lower than the estimated 4.6-percent pace in 2018, it’s still solid. Besides, not all those refund dollars go to purchases, as some recipients use the money to pay debts and increase savings.
Jack Kleinhenz, chief economist for the NRF, said first-quarter spending was affected by various other factors including the government shutdown and trade tensions. Slightly smaller refunds likely played a role, “but the slower pace of refunds received and processed is as much an issue as the amount,” he said.
Besides, Kleinholz said there’s often a lag between when people receive tax refunds and when they spend the money: “They do not immediately flow into the economy.”
Average refund amounts were distorted earlier in the year. Partly, this was due to tax reform, which cut tax rates but also resulted in lower paycheck withholding in 2018. With more money returned to taxpayers during the year, refunds should be a bit lower.
Another factor was increased Internal Revenue Service efforts to combat fraud. The IRS now delays refunds until mid-February for those people claiming the Earned Income Tax Credit or the Additional Child Tax Credit. This gives the IRS more time to try to spot fake returns filed in someone else’s name.
If you are expecting a federal refund, you can check the status on the irs.gov website by clicking on “refund status,” and then “where’s my refund?” You will need to plug in your Social Security number, filing status (such as single or married) and the exact amount of the refund that you’re claiming. The IRS updates the information about once a day, usually overnight.
Arizona also has a “Where’s my refund?” section, at azdor.gov.
Satisfaction with tax reform
The current tax-return filing season appears to have gone off reasonably smoothly, despite new rules ushered in by tax reform. In an online survey of more than 1,000 people by Policygenius, 61 percent of respondents said filing tax returns was easier this year than in the past.
Simplification was a goal of federal tax reform enacted in late 2017. Among various changes, the new tax package gave taxpayers a larger standard deduction, allowing fewer to itemize deductions — a relatively cumbersome task.
In a March survey from the National Endowment for Financial Education, respondents didn’t sound all that dissatisfied about the tax-filing process or their personal situation.
Some 42 percent of the more than 2,000 respondents who filed said they’re satisfied with the outcome, and another 25 percent said they’re neither happy nor unhappy, with only 33 percent expressing dissatisfaction.
“The results don’t seem to align with what we’ve been hearing anecdotally about people’s (unhappiness) of filing taxes under the new tax law,” said Billy Hensley, president and CEO of the NEFE, in a prepared statement.
The many changes and lower withholding amounts that resulted from tax reform led to speculation that many people would end up owing money unexpectedly. However, about three in four respondents said they received a refund, while only one in five owed more taxes, with the rest pretty much breaking even.
Last-minute deductions still possible
There isn’t a whole lot you can do at this late date to shave your federal tax bill, but opening an Individual Retirement Account is one possibility. This year’s April 15 filing deadline is the last day to invest money in an IRA and count it for 2018. If it’s a traditional IRA and you qualify for a deduction, you can still take it for 2018.
The rules are somewhat complex, which has discouraged people from investing in IRAs. But for active participants in a workplace retirement plan, in general, deduction eligibility ends with income exceeding $73,000 in 2018, or $121,000 for married couples filing jointly. If you don’t belong to a workplace plan, there’s no income-eligibility test. But you need earned income at least to the amount of your contribution.
“IRAs offer considerable tax benefits — you might even be able to reduce last year’s tax bill,” noted a summary by the Investment Company Institute, a mutual-fund trade group.
Alternatively, you could invest in a Roth IRA. You won’t get a deduction with these accounts, but your money will come out tax-free when you eventually make withdrawals (subject to certain restrictions).
IRA contribution limits are rising to $6,000 in 2019 from $5,500 in 2018. People ages 50 and up can add another $1,000 in catch-up contributions.
The retirement-savings tax credit, available to moderate-income people, can be used to fund IRA contributions. This tax break, worth up to $1,000 (singles) or $2,000 (married couples filing jointly), is available to taxpayers with 2018 adjusted gross income up to $31,500 (singles) or $63,000 (married).
Arizona allows taxpayers to make donations and claim various credits as late as April 15, then apply them to 2018 state returns.
This retroactive provision applies to the public-school extracurricular-fee credit, the private-school scholarship credit, the credit for donations to qualified charitable organizations and others.
For details, review the “tax credits” section at azdor.gov.
Last day to claim 2015 refunds
April 15 is also the last day for people to file federal 1040 returns from three years earlier in hopes of claiming refunds. The median estimated refund for 2015 is $879. Earned income tax credits for lower-income workers account for some of the unpaid refunds.
An estimated 1.2 million taxpayers, slightly less than 1 percent of the total, have amassed unclaimed refunds totaling $1.4 billion, the IRS said. That includes an estimated $29.5 million in unclaimed refunds waiting for 27,300 Arizonans.
Students and part-time workers are among those who might not have filed for 2015 and might be missing refunds. There’s no penalty for filing a late tax return if you’re due a refund. If not claimed after three years, refunds are kept by the Treasury.
Refunds might be held for taxpayers who didn’t file returns for 2016 or 2017. Also, refunds will be applied to amounts still owed to the IRS or a state tax agency. They also can be used to meet unpaid child-support obligations or pay past federal debts, such as student loans.