Need ex­tra 6 months to file taxes? Here’s how

The Arizona Republic - - Front Page - Reach Wiles at [email protected] ari­zonare­pub­lic.com or 602-444-8616.

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.

Russ Wiles Colum­nist Ari­zona Repub­lic USA TO­DAY NET­WORK

AP

Six-month fed­eral tax-fil­ing ex­ten­sions are free and au­to­matic.

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