Four Things to Know Before the IRS Tax Filing Deadline

The Internal Revenue Service federal income tax filing deadline is April 15 this year in all but two states. Maine and Massachusetts have extensions until April 17 due to the Patriots’ Day holiday there.

With the deadline fast approaching for all taxpayers, here are a few things to know before filing your tax returns as the 2024 tax filing season draws to a close. 

There's Still Time for IRA and HSA Contributions

Taxpayers have a couple of options to improve their 2023 tax returns, even though the year has ended.

The IRS allows tax filers to make 2023 contributions to their Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs) until midnight on the 2024 tax filing deadline. There are limits on the amounts taxpayers can contribute to these accounts, generally based on age. 

IRAs, and similarly HSAs, allow pre-tax contributions from taxpayers and there are a couple of advantages of the extended deadline for contributions to these tax-deferred accounts. One is that it can reduce the taxable income reported on your Form 1040, lowering your tax obligation. Another is that it offers taxpayers an opportunity to take full advantage of their 2023 contribution limits, even though the year has passed.

"Sometimes people try to fit in an IRA or tax-advantaged contribution after they know their tax liability in an effort to reduce it. Sometimes they may wait to gain clarity on if they even qualify for a deductible IRA contribution," said Autumn Knutson, founder and financial planner with Styled Wealth in Jenks, Oklahoma. "I also have several clients that received an April bonus that find themselves using that for their 2023 deadline items."

Look Out for Bad Social Media Advice

Maybe you saw that TikTok video about taking the Fuel Tax Credit. Well, unless you own an agriculture business, it’s unlikely you qualify for the tax credit, and trying to claim it could be more costly than you realize. 

The IRS has issued a slew of fraud warnings this tax season, including highlighting bad advice on social media, such as how to improperly claim the fuel tax credit. However, the IRS is aware of these scams and said they will be watching returns with those credits. The result could be charges of refund fraud. 

“People should be careful with who they’re following on social media for tax advice," IRS Commissioner Danny Werfel said in a prepared statement. "Unlike hacks to fix a leaky kitchen sink or creative makeup tips, people shouldn’t rely on made-up ways on social media to patch up their tax return and boost their refund.”

Fewer Refunds Are Going Out

The total value of refunds paid out is higher, with the average refund coming in at $3,050, nearly 5% higher than last year. However, fewer tax filers are getting refunds, down more than 3% compared with the same time last year.

One reason is that more tax filers have side gigs like Uber driving or eBay sales, and if they didn’t put enough aside for taxes on those earnings, they could end up paying for it out of their refund, or even owing, said Mark Steber, chief tax information officer at tax preparer Jackson Hewitt.

“A lot more clients came in and they owed, and they owed for a good reason—they made more money on their side hustles,” said Steber.

Other factors are also playing into the lower refund volume, Steber said, including more capital gains reported from a booming stock and cryptocurrency market and more untaxed retirement account distributions.  Plus, changes to tax laws in 2020 reduced tax withholdings from paychecks for many Americans, also factoring into refund volume and amounts.

Overall, the result has been fewer people getting bigger refunds, putting more pressure on those who aren’t getting money back or getting smaller refunds, Steber said.

Be Aware of Filing Extension Options, Tax Payment Plans, and Non-Filing Penalties

Taxpayers have until midnight to file electronically or have it mailed with a postmark on the tax deadline filing date. But what if you’re not ready to file by the deadline?

Taxpayers have some options, starting with filing an extension, which can push your tax deadline back to Oct. 15 if you need more time to gather and organize your information.

Filing an extension is a much better option than failing to file your tax return, which comes with an automatic fine that can amount to 5% of the total owed each month, with a maximum fine of 25% of the total each year.

If you’re ready to file, but not ready to pay, you can apply to enter into a payment plan with the IRS, including both 180-day no-interest plans and long-term installment plans that include fees and interest rates that are lower than the penalties.

Filing your tax return without paying the taxes also incurs a fine, but it’s lower than the penalty for not filing at all, amounting to 0.5% of the total owed each month, maxing out at 25% of the total.