The Unfortunate Tax Adventures of Eager Emily
The IRS has announced that the 2016 tax season will begin Monday, January 23, 2017, and the filing deadline for returns without extensions is Tuesday, April 18, 2017*.
This means the IRS will begin accepting electronic tax returns on Monday, January 23. However, most software companies and tax professionals will accept tax returns prior to Jan. 23 and will then submit those returns when IRS systems open on the 23rd. Paper-filed tax returns will begin to be processed on the same date, so there is no advantage to filing by mail prior to the e-file acceptance date.
The most important thing to remember is that filing a correct and complete return will allow you to get your refund (or make your payment) and forget about it for another year. The most common mistake taxpayers make is in filing their tax return prior to receiving all their year-end tax statements.
Let’s use Eager Emily as an example:
Eager Emily’s employer issued W-2’s on January 2nd. After work, Emily rushed home, logged on to TrustyTax and started entering her information. After everything had been entered, she was giddy to see that she would be receiving a refund of $1,200! She clicked the ‘Submit’ button and began monitoring her bank account for her tax windfall.
Two weeks later, Emily was getting antsy because she still hadn’t received her refund. When she checked her mail that day, she discovered another W-2, from an employer she had worked for over the summer. She had completely forgotten about that job when she filed her tax return. So, she logged back on to TrustyTax to add the second W-2. Unfortunately, because she had already submitted her return, she could not make any changes to it and would not be able to file an amended return (to report the additional W-2) until after she received her initial refund!
Because it was only January 16, the IRS was not yet accepting returns for processing. Hers was held in limbo until the ‘opening date’ of January 23.
January 23 finally rolled around and the IRS began accepting returns. Most refunds are issued within three weeks, and Emily FINALLY received her $1,200 refund just before Valentine’s Day. She met up with some friends for a long weekend in Sedona, and splurged on spa treatments, wine, lavish restaurants, and shopping.
When she returned from her weekend, the $1,200 was completely gone, but she knew she had another W-2 to report and visions of another refund/spa weekend danced in her head. She logged on to TrustyTax and entered all the information from the second W-2 line by line, only to discover….there was no refund!! Instead, she owed money to the IRS!!!! How could that be possible??
Unfortunately for Eager Emily, the refund she initially received was too large because it hadn’t factored in all of her information. Now she found herself in a situation where she needed to re-pay some of that money that she had already spent.
The bottom line? If Emily had just waited a bit, her return would have been correct and complete, and she would not be stuck re-paying money she had already spent. She could have filed her return including both W-2 forms on January 22 and it would have been accepted on the IRS opening day of January 23, the same as if she had filed it on January 2.
Generally, you should receive most of your tax documents by the end of January or early February. Before you rush to file your tax return, think about your income and expenses in 2016. Did you receive any income which may be reportable in the tax year? Did you have any potentially tax deductible expenses in 2016? If so, hold off until you are certain that you are not omitting any required information!
*The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday (April 17). However, Emancipation Day is observed on that Monday in the District of Columbia, which pushes the nation’s filing deadline to Tuesday, April 18, 2017.