A Taxing Day

Today is when most U.S. citizens will file their income tax return, an annual requirement.

It's also the 128th running of the of the Boston Marathon today. Managed by the Boston Athletic Association and run every April 15 (Patriots' Day) since April 1897 even during WW I and II. Ham radio operators, including Patrick, are providing communications along the 26.2-mile route. He'll also be cheering a runner on as our chiropractor is running for the first time.

Since 1954, April 15 has been the tax filing deadline with exceptions for when it has fallen on the weekend. During the pandemic, the Treasury Department and Internal Revenue Service (IRS) delayed the 2020 and 2021 deadlines. According to online estimates, over 54 million returns had been filed in the first few weeks of the filing season which began on January 29. The IRS expects more than 128.7 million returns to be filed by today's deadline.

It's a task never looked forward to, even though it's a well known (but not beloved) date. Last minute filers will be hurrying to file and postmark 2023 income tax returns (or file for a 6-month extension to Oct 15) until midnight today. Earlier today, I was at the local post office and can attest to the lines of folks doing that to ensure a postmark of today.

Thankfully, I wasn't there to mail our return which was already completed and e-filed and will be getting a smallish refund. While, we could have used tax software to prepare it, our preference has been to use a local certified public accountant (CPA); per online estimates, 34 percent use a CPA or accountant, 41 percent self-file and 25 percent use an assisted service company. 

The American Association of Retired Persons (AARP) Tax-Aide program annually provides free tax services to anyone focusing on taxpayers over 50 or who have low to moderate income. Our friends have been volunteering for the past several years. They take part in annual training to become IRS-certified to understand tax code updates. We see little of them at tax season.

While today is the deadline to file returns, there's exceptions, like here in New England, where residents of Massachusetts and Maine who observe Patriots Day today have until April 17. Residents of Washington, D.C., celebrating Emancipation Day on April 16, have until April 18 to file tax returns. 

Others who don't file today include Americans who live or do business in a federally-declared disaster zone. Those living abroad (expats) have until June 15, but must pay the IRS what's owed for tax year 2023 by April 15. Members of the U.S. military stationed abroad get a 2-month extension, and other extensions including to pay, if they are in a combat zone.

Not only federal taxes have to be filed, but state taxes too. Yes, there's exceptions for those living in a state with no state tax, which (happily for us) includes New Hampshire, also Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming. While the remaining 41 states mostly adhere to the April 15 federal deadline, exceptions are Delaware, Iowa, Louisiana and Virginia which have varied filing deadlines. 

No grace period  for lateness. 

It's a legal requirement to file annual tax returns. The IRS penalizes those who fail to file on time. A failure-to-file penalty amounts to 5 percent of unpaid taxes for each month or partial month a return is overdue, with a maximum of 25 percent of the total balance due. The U.S. government can impose civil and criminal penalties for tax return skips.

Ironically, those who don't file, don't owe money, and are due a refund can't get it until a return is filed. There's a 3-year window before the refund is no longer available. If you're in this group, the IRS reported that taxpayers for tax year 2020 have until May 17 to claim nearly $1 billion in tax refunds.

Do Other Countries File Annual Taxes? Income tax is a source of government revenue globally, although some countries don't impose an income tax on residents or citizens. Instead, these countries rely on other types of taxation, such as Value-Added Tax (VAT) and property tax.

Countries with No Income Tax? Most countries have a form of personal income tax, but some countries do not have any income tax on individuals for personal income earnings. It's not all tax-free. There's other types of taxable income, like wealth taxes applied to for U.S. folks who are permanent residents and are taxed on worldwide income even if living and earning income in a no-tax location.

Thinking of relocating? Just in case, here's a list of tax-free countries or territories — Anguilla, Antiqua and Barbados, Bahamas, Bahrain, Bermuda, British Virgin Islands, Brunel, Cayman islands, Kuwait, Maldives, Monaco, Oman, Qatar, Saint Kitts and Nevis, Saudi Arabia, Somalia, Turks and Caicos, United Arab Emirates, Vanuatu, Western Sahara.

Filed and waiting for tax refund. Online sites let can track a federal and state return status. If it's been a while coming, reasons for the delay include common ones like the wrong Social Security number or incorrect direct deposit information. The IRS could also hold up a refund if it requires additional review or it's incomplete. 

We're glad this task is done this year, but there's always next year, unfortunately.