For those waiting until the final days (if not hours), there are options, says Tim Rupert, professor and group chair of accounting at Northeastern.
Tax Day is coming up fast. Have you filed your returns?
If not, then take comfort that you are by no means alone. Almost 30% of taxpayers wait until the final three weeks to fill out their returns, according to the Internal Revenue Service.
The deadline for filing is April 17 in Massachusetts and Maine, due to local holidays. For the rest of the U.S., returns should be filed no later than April 15.
For those waiting until the final days (if not hours), there are options, says Tim Rupert, professor and group chair of accounting at Northeastern.
Rupert spoke with Northeastern Global News about the pros and cons of tax software, how to file for a six-month extension without being penalized, and other matters as Tax Day approaches.
“There’s still time for most people to get it done,” Rupert says.
What is your advice for somebody who hasn’t even started pulling together their tax information with less than a week to file?
One of the first things you have to decide is: Are you going to do it yourself, are you going to use software, or are you going to get a tax professional to do it for you? The truth is if you’re looking for a tax professional, you’re probably not going to get one to finish it for you by the deadline.
But the good news is there’s an opportunity to procrastinate even further because you can file for an extension. It’s an automatic six-month extension that can give you more time to get everything ready — especially if you’re not sure where all the tax information forms are.
Is there a downside to filing for an extension?
It’s important to understand that it’s an extension to file your return, but not an extension to pay the taxes. Any taxes that you owe, you have to pay those by the (Tax Day) deadline. You can estimate what you owe so that you won’t be penalized for underpaying.
How can someone estimate their tax payment before they file a return?
The first thing that you have to do is estimate what your total income is. Hopefully you have your W-2 from your job, which shows the taxes that have been withheld. And then you have to figure out a basic estimate of what your tax rate is.
It can be a little bit more difficult to come up with an estimate because so many people now have work that they’re doing on the side. Not only do you have to pay income taxes on that, but you have to pay Social Security taxes — or self-employment taxes — as well. Typically, whatever your tax rate is, that’s adding another 15.3% onto it. So that can become pretty substantial.
Why should taxpayers rely on software to file their returns?
In many cases you can prepare your returns for free, including two programs that the IRS offers. One is called Direct File. It’s a program that’s being piloted in 12 states, including Massachusetts, which means that people on the Boston campus can use that software for free if their adjusted gross income is less than $79,000.
There are other programs that partner with the IRS, like TurboTax and H&R Block, and many taxpayers can file for free there as well.
Are there negatives to using tax software?
They usually have income limits that may prevent you from being able to file for free. And you have to be careful because they may charge you to file for your state return.
Also, anytime that you have your own business, there are going to be a lot more questions that you have to answer — and sometimes by answering something incorrectly it can make a huge difference in your tax return. So I think people who run their own businesses should think about getting professional help.
And if you’ve moved from one state to another during the year, it becomes much more complicated to file your state return.
And then for our international students, it’s important to realize that the tax software is developed for U.S. citizens and residents. Our international students at Northeastern typically count as non-residents and so they have to file a different form.
The IRS is in the process of hiring close to 20,000 new staff. Is it becoming easier to call the IRS for help with tax-related questions?
The tough thing is that the types of questions that they can get are so varied, and so to have trained professionals that are able to answer those questions can be difficult. I still think they have a ways to go for it to be as proficient as it should be. But they’re getting better.
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Do you find a lot of people approaching you with tax-return questions?
I do tend to get a lot of questions. Usually it’s for ‘a friend’ (air quotes).
You know, in our accounting programs not everybody goes into tax; most of them go into auditing. This is the time of year when I joke with my students that nobody comes up to you at a co*cktail party and asks you an auditing question or a financial accounting question. It’s always a tax question.
So it’s good to know something about it if you’re an accountant.
By the way, have you ever been in this position of waiting until the last minute to do your taxes?
I haven’t started mine yet. So the answer would be yes.
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