3 Reasons I Procrastinate Filing My Income Taxes
My wife is constantly nagging me to file our income taxes. But our taxes are complicated. We have multiple streams of income, a limited liability company, rental property income and a host of other items that make our taxes more complicated than most.
It doesn't help that I also have put off hiring an accountant or a tax professional to help me file my taxes. I have a feeling I'm not alone. Is there something fundamentally wrong with waiting to file my income taxes until the last minute?
I'm Scared I Will Owe Money
I've underpaid my tax withholdings before and owed taxes after filing my income tax return. It's not a fun feeling.
I'm scared that I will be one of the 25 percent of Americans who owe taxes at the end of the year. This is of course my own doing.
Thanks to side incomes, rental income and pet projects, I have variable monthly income. And of course I haven't been diligently setting aside money to pay the taxes on the amount that I've earned as an independent contractor.
One way to avoid this is to pay quarterly taxes. I should be doing this on top of the taxes withheld from my regular paycheck. But that leads into my next excuse as to why I procrastinate filing my tax return. I'm lazy.
I'm Lazy and Don't Want to File
It's inertia. Like Isaac Newton's first law of motion, objects at rest tend to stay at rest unless acted upon by an outside force. The same is with my taxes. It's easier to stick my head in the sand and continue to hide.
I know that's not the right answer, but I'm lazy. Filing my taxes is boring, tedious work. And I'm a control freak. I have trouble turning over control and even my taxes to a professional. So, I choose to continue to do them myself.
This is true even though I have made mistakes on my tax forms in the past. You know that you've made a big mistake when Internal Revenue Service sends you an additional check out of the blue because it has caught mistakes you made. That actually happened to me a few years ago.
I've Been Deployed Serving in the Army
Another reason that I continually postpone filing my income tax return until the last possible minute is that my day job often finds me out of the country. I've been deployed four times while serving in the U.S. Army that have hampered my ability to file my taxes on time.
Or at least that's the excuse that I'm using. Being deployed allows me to file an extension for my tax return. And, like many soldiers, I've used the extension on occasion.
But this is another excuse and has only delayed the inevitable. The Army has made it easier than ever for soldiers to file their taxes. There are tax centers on every base. Military One Source has free online tax tools for service members use. My wife even has a power of attorney. But, here we are only a few days away from the tax deadline, and I still have not filed my income tax return.
Is It Such a Bad Idea Waiting to File?
Filing an extension or waiting until April 15th isn't too bad of a practice, though. The one drawback is that it delays you receiving an income tax refund -- if you get one.
A tax refund occurs when you overpay your taxes from your paycheck each month. Most financial experts equate it to giving the government an interest free loan.
Almost 75 percent of Americans earn an income tax refund. We have too much of our money withheld every year. Many of us overpay taxes on purpose to get a refund each year. My wife thinks of it like an annual bonus like you'd receive from your employer.
Your tax refund is yours. You've earned it, and you've paid too much in taxes to the government. That's why you're getting a refund. Who would put that money to a better use, you or the federal government?
One drawback to waiting to file is that it is harder to fine help in a timely manner if you need it. We're not alone waiting until the last minute. And because of that, most tax professionals and accountants are incredibly busy this time of year. If you find that you need help with your taxes in April, you may struggle to find someone who can help you right away. You may have to file an extension until you can get the professional help you need.
Adjust Your Withholdings This Year
The best way to avoid giving the government an interest-free loan is to adjust your monthly withholdings. Your goal should be to keep more money in your pocket each month and have a very small, if any, income tax refund at the end of the year.
According to the IRS, the average income tax refund in America is approximately $3,500. That's almost $300 per month that you could take home in your paycheck instead. Who couldn't use an extra $300 each month in his paycheck?
You can find a withholding calculator on the IRS website that can help you determine how many withholdings to claim to more accurately pay the taxes you owe throughout the year and shrink your income tax refund. You can submit a new W-4 to your employer anytime throughout the year.
I tell myself each year that I'm going to adjust my W-4 to withhold fewer taxes each year. And this just may be the year that I actually do it.
Are you like me and procrastinate filing your income taxes each year? What holds you back from filing early? Is it necessarily a bad thing to wait until the last minute?
Hank Coleman is the publisher of the popular personal finance blog Money Q&A, where he answers readers' tough money questions. Follow him on Twitter @MoneyQandA.