Apr 20, 2021
3 Things People Dread Most About Taxes
Plus, some solutions for procrastinators.
Procrastinators may have a reason to celebrate this year: The Internal Revenue Service (IRS) pushed the tax filing deadline to May 17, 2021 from its usual mid-April deadline.
While that date gives the IRS much-needed time to accommodate new stimulus payments and a backlog of tax returns, it also gives procrastinators more time to delay filing. With that in mind, we’ve researched the top reasons why people delay doing their taxes, and offer some tactics to help motivate you to get the job done.1
1-Your taxes are complicated
The Covid-19 pandemic has made many people’s financial situations more complex. You may have seen your income or circumstances change, which can make filing all the more daunting. Maybe you moved home and earned income in a few different states this year. Or maybe you lost your job and ended up taking on several freelance gigs. Or maybe you received unemployment in 2020, which has specific filing exemptions this year.
Solution: Being informed is probably one of the best ways to prepare when you have a complicated tax situation. Try getting caught up on rules or regulations that might apply to you and your taxes so that you’re filing correctly. You can get more information from Stash’s guide to tax season, or on the Internal Revenue Service’s (IRS) website.
You can hire a tax professional for a fee through services such as H&R Block, Turbo Tax, or QuickBooks. Depending on your tax situation, you may be able to work with a professional for free or for a reduced fee. Having a professional review your information before you file can give you peace of mind.
Keep in mind that some people qualify to file their taxes with a service for free. The IRS offers a Free File program for roughly 70% of Americans. Taxpayers who earn an Adjusted Gross Income (AGI) of $72,000 or less can file their federal taxes, and in some cases their state taxes, for free with tax preparation software.
If you’re not comfortable handling your taxes by yourself, you might want to consider hiring a tax professional. “A small fee upfront is worth it to avoid all the stress and fear (and possible penalties fees). You can trust that a trained professional knows all the ins and outs of the tax code this year, so you can just write your check and relax,” says Josh Zimmelman, managing partner of Westwood Tax & Consulting, based in Rockville Centre, New York.
2-You’re afraid you might owe money
Some people don’t pay all or some of their taxes throughout the year and then have to pay them once it’s time to file. There are a few reasons you might owe money:
- If you have a full-time job, you filled out a W-4 indicating how much of your paycheck should be withheld for tax purposes. But if less money was withheld from your income than you actually owe, you could end up owing once you file.
- Freelancers owe taxes on a quarterly basis. They have to pay estimated taxes each quarter, as well as a self-employment tax. If a freelancer doesn’t pay enough, they could end up owing once it’s time to file for the year.
- This one likely only applies to a handful of people. But if you won something in the past year, such as the lottery or a new car, you’ll likely owe taxes on that prize when you file.
Solution: If you think you won’t be able to afford your tax payments, the IRS recommends that you file before the deadline, and pay as much of the penalty as you can. Failing to make your tax payments on time can lead to additional fees and interest, so making an initial payment can help prevent that. You may consider pulling from your rainy day fund or emergency fund to cover as much of the debt as you can.
You can also call the IRS to inquire about a payment plan. The IRS may be able to give you an extension, and a schedule for repayments. For no fee, you can set up a 120-day payment plan, but you’ll still have to pay interest and other penalty fees until you pay off your debt. Or you can establish a six-year plan, which costs $31 to set up in addition to interest and penalties.
A longer-term course of action for people who think they’ll owe taxes at the end of the year is to stick to a budget throughout the year that includes setting aside money for tax payments. “This involves controlling one’s spending, which many people fail to do, and they end up spending their earnings,” says Bryce Welker, a Certified Professional Accountant based in San Diego, California.
One budget you might use is the 50-30-20 one, which segments your income into three categories: 50% for essential, fixed expenses, 30% for nonessential, variable expenses, and 20% for savings and investing. Make sure to figure your quarterly estimated taxes into your budget. You may want to allocate more than 20% of your income to savings so that you have backup funds to fall on if you owe money on your annual taxes.
3-Taxes are boring
You don’t often hear friends or coworkers saying they’re excited to do their taxes. It’s a task which a lot of people find tedious. And people are more likely to procrastinate on work they find boring, difficult, or not intrinsically rewarding, according to Harvard Business Review. Doing your taxes can be both boring and difficult, and doesn’t always result in a refund.
Solution: One strategy is following an earlier deadline than May 17. “Create your own self-imposed deadline earlier in the season and enlist a friend to dole out some real life consequences should you fail to meet it or reward yourself if you do meet it,” Zimmelan recommends. For example, try to get your taxes done by the end of April, and reward yourself by ordering takeout or watching your favorite movie once you’re done.
Getting your taxes done early can alleviate any stress that you might have about filing. If you find you’re having issues with your taxes or you’re confused about your taxes, it’s better to give yourself time to consult with a professional if needed. The sooner you file your taxes, the sooner you’re likely to receive your refund, if you’re eligible for one.
For more information on tax season, including the materials you’ll need, important dates, and more, refer to our tax guide.
Enter to win $5,000
If you direct deposit your tax refund or government stimulus check into your Stash banking account, you can earn a chance to win.‡Find out more
1This should not be construed as tax advice. Please consult a tax professional for additional questions.
‡NO DEPOSIT, PURCHASE OR PAYMENT NECESSARY TO ENTER OR WIN A PRIZE. A DEPOSIT, PURCHASE OR PAYMENT DOES NOT IMPROVE YOUR CHANCES OF WINNING. Sweepstakes begins on February 09, 2021 at 12:01 AM (ET) and ends on June 30, 2021 at 11:59 PM (ET). Sweepstakes open to legal residents of the 50 U.S., D.C., and PR who are at least 18 years of age and a Stash Banking Account Holder (as defined in the Official Rules) at the time of entry. Prize valued at $5,000. Total value of all prizes awarded: $5,000. Odds of winning depend upon the number of entries received. Limit three (3) entries per entrant. Void in all U.S. territories and possessions and where prohibited by law. See Official Rules for complete details at https://lp.stash.com/tax-refund-sweepstakes-2021/. Sponsor: Stash Cash Management, LLC, 500 Seventh Avenue, 18th Floor, New York, NY, 10018.
This offer excludes Retire (IRAs) and Custodial (UGMA/UTMA) accounts.
Bank Account Services provided by and Stash Visa Debit Card (Stock-Back® Card) issued by Green Dot Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc. Visa is a registered trademark of visa International Service Association.
Sweepstakes is not sponsored or endorsed by Green Dot Bank, Green Dot Corporation, Visa U.S.A. Inc., or any of their respective affiliates, and none of the foregoing has any responsibility to fulfill any funds earned through this sweepstakes.
How to Make Passive Income: 27 Passive Income Ideas For 2023
The Best Personal Finance Books on Money Skills, Investing, and Creating Your Best Life for 2023
What Is a Financial Plan? A Beginner’s Guide to Financial Planning
How to Build Credit: Why You Need It and How to Get It
Credit Cards vs. Debit Cards: The Differences Can Add Up
How to Get Out of Debt in 6 steps