If you filed a tax extension for more time on your 2022 return, the deadline is fast approaching.
The federal tax-extension deadline on Oct. 16 is the last chance to avoid a late filing penalty, according to the IRS. However, some filers in disaster areas may have additional time.
“The best thing you can do to meet the extension deadline is to get organized,” said certified financial planner Chris Cybulski of Chisholm Trail Financial Group in Austin, Texas. “Highlighters, sticky labels and manila folders are your friends.”
“There is nothing worse than having an incomplete mess with only days to file,” he added.
Here are three things to know if you still haven’t filed your 2022 return, according to financial experts.
1. Know the IRS late penalties
If you skip the deadline, you could see two IRS penalties, according to Kassi Fetters, a CFP and owner of Artica Financial Services in Anchorage, Alaska.
The failure-to-file penalty is 5% of unpaid taxes for each month or part of month until filing, capped at 25%, she said. By comparison, the failure-to-pay fee is 0.5% per month or partial month. Both include interest.
2. You may be eligible for IRS Free File
Roughly 70% of taxpayers qualify for IRS Free File but only 2% used it during the 2022 filing season, according to the National Taxpayer Advocate.
You may be eligible with a 2022 adjusted gross income of $73,000 or less — but Free File is only available through Oct. 16 at 12 midnight ET, according to the IRS.
It’s a good option for those who have simple returns, don’t need ongoing tax-planning advice and could benefit financially from the free service.
Judy Brown
Principal at SC&H Group
“It’s a good option for those who have simple returns, don’t need ongoing tax-planning advice and could benefit financially from the free service,” CFP Judy Brown at SC&H Group in the Washington and Baltimore area, previously told CNBC. She is also a certified public accountant.
3. You can still fund SEP individual retirement accounts
There are limited opportunities left to score a 2022 tax deduction before filing, said Houston-based CFP Scott Bishop, managing director of Presidio Wealth Partners. He is also a certified public accountant.
But self-employed, contract or gig economy workers can still contribute to a simplified employee pension, or SEP, individual retirement account, he said. “That could help your retirement plan and give you a nice deduction.”
You can establish a SEP IRA as late as your business’ income tax return deadline, including extensions, according to the IRS.
Join CNBC’s Financial Advisor Summit on October 12th, where we’ll talk with top advisors, investors, market experts, technologists, and economists about what advisors can do now to position their clients for the best possible outcomes as we head into the last quarter of 2023, and face the unknown in 2024. Learn more and get your ticket today.
