Beware the Perils of Tax Procrastination

Income Taxes, Taxes
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Psychologists say we tend to procrastinate when we fear or dread doing some task. Perhaps that explains why that as April began, the Internal Revenue Service was still waiting for more than 59 million taxpayers to finish their returns.

But tax procrastination can come with a price. Actually, several of them.

If you’re still delaying doing your taxes, be aware — and beware — of these five procrastination pitfalls.

1. You’re more likely to make a mistake

The adage “haste makes waste” certainly can apply to frantic tax filing. Even if you use tax preparation software that walks you through the process, in your rush you might enter incorrect amounts that could cost you more in taxes. Or you may decide to ignore a potential tax break that could save you money simply because you’re running out of time to go through the steps to claim it. Either way, you pay a tax price.

2. It’s harder to handle a tax surprise

You got your W-2 from your employer months ago. Ditto 1099-MISC forms from any side hustles. Unfortunately, you didn’t check the tax statements back then, and now, with the filing deadline looming, you discover some mistakes. You must get the erroneous information, which was copied to the IRS, corrected or risk the tax agency asking questions about your return. That takes time, which now you’re woefully short of.

Even worse, your last-minute filing might reveal you owe the U.S. Treasury more than you expected. Suddenly you have to scramble to come up with the payment or pay less than you owe. If it’s the latter, the IRS can start running a tab for penalties and interest on the amount of unpaid tax.

3. Good tax help is more expensive

You encounter a new tax situation and realize you need professional help to sort it out. Good luck. Many tax professionals don’t accept clients late in the filing season. Those who do often charge more for last-minute jobs.

If a tax pro does take you on so late, he or she might simply file an extension and then sort through your tax issues after the filing deadline. Remember, though, that the extra six months you get with an extension is only for filing your return. You still must pay at least a good estimate of any tax you owe by the April deadline or risk penalties and interest.

4. You lose the time value of your refund

While many tax procrastinators put off filing because they know they owe Uncle Sam, some folks who delay are getting refunds. Really! In this situation, months in which a refund could have been earning money in a high-yield savings account or as part of a longer-term investment are wasted.

5. Criminals have more time to steal your identity

The IRS has made strides in stopping tax identity theft and refund fraud: The agency’s commissioner, John Koskinen, told the Senate Finance Committee in April that the number of people who informed the IRS they were victims of identity theft declined by 46% last year. But plenty of tax crooks are still out there. The only sure way to stop them from filing under your name and Social Security number is to do so yourself, legitimately, first.

If you’ve waited this long to file, the tiny bit of good news this filing season is that you have a few more days. Because the usual April 15 deadline is pushed back by the weekend and by the Emancipation Day holiday on Monday, tax returns aren’t due until Tuesday.

Don’t waste those three extra days. File now or you might end up paying a higher tax price. And make a resolution to file your return earlier next year.

Kay Bell is a contributing writer at NerdWallet, a personal finance website.