Your dental surgery. Your colonoscopy. Your income taxes.
There's always a massive bout of procrastination across the U.S. in the weeks leading up to Tax Day, which is April 18 this year. This foot-dragging has been called an American tradition, up there with not saving enough for retirement and fantasizing about what we’d do if we won the lottery.
But those who file their tax returns in the first two weeks of April, or after the deadline, often aren't slackers. Some taxpayers may have no choice but to file at the last minute—and suffer surge pricing for their tax preparation—because forms they need haven’t arrived. Some are minding their cash flow, because they owe the Internal Revenue Service money. Then there are people, like some college students, who aren't actually procrastinating but just don’t know that they could get money back if they filed a return.
Filing close to, or after, April 18 could be a sign you're a member of the financial elite. Those who file closer to the deadline are, in general, wealthier, said Lisa Greene-Lewis, a certified public accountant and TurboTax blog editor, and tend to have more complex taxes. These are people who, unlike many early filers, don't need to rely on a big tax refund for car repairs or to meet some other pressing household need.
The average refund processed in April of last year was $2,309, or 19 percent lower than the average refund of $2,853 processed from January to March of that year, according to H&R Block. Fewer people filing in April get refunds: 65 percent of those returns got a refund last year, compared with 81 percent of returns filed from January to March.
Wealthy or not, some 20 percent of Americans are “chronic procrastinators,” according to research done by Joseph Ferrari, a professor of psychology at DePaul University. The fear and loathing of doing one’s taxes can be extreme. A recent WalletHub survey found that 35 percent of those surveyed would rather have the sex talk with their kids than do their taxes.1
But procrastinators may want to aspire to the ranks of those who file after the month of April. While a much lower-than-average percentage of filers got refunds then—51 percent in 2015, according to H&R Block—they got a much higher-than-average refund of $3,500.
If last year’s pattern plays out again, about 66 percent of people will have filed their taxes before the two weeks leading up to the deadline. During the final two-week stretch, some 22 percent of taxpayers tend to suck it up and file. Then there are the 12 percent or so of taxpayers who will file after the deadline.2
That 12 percent includes the ranks of the extenders, who file a Form 4868 to be allowed to file taxes as late as Oct. 18 (six months after the deadline). The usual percentage of taxpayers who file extensions is about 8 percent, according to the IRS.
That adds up to a lot of taxpayers. In 2011, 11 million people filed for an extension. In 2013, that number rose 20 percent, to 13 million, and stayed at that level in 2014.
Extenders can congratulate themselves or their accountants on actually filing the form, on time, that gives them six months to file the final forms. They still have to pay estimated taxes, however—something Greene-Lewis said some late filers are shocked to discover. If you owe, whatever you pay has to be within 90 percent of your liability or you’ll pay a penalty.
Extenders are a predictable bunch. “Most of the people who file later typically procrastinate every year, even if they’re getting a refund,” said Greene-Lewis. And, yes, many wait until right around the six-month deadline, she said. By September of 2015, only about one quarter of all taxpayers who filed for an extension had filed their taxes, said Martha O'Gorman, chief marketing officer for Liberty Tax Service.
Some taxpayers have little choice but to file an extension, often because they need a form called a K-1. These forms, filed by private equity, venture capital, and hedge funds structured as partnerships, can take until late summer to show up, as the partnerships themselves may have filed for an extension. (They do have to file by Sept. 15.) Waiting for forms needed under the Affordable Care Act may also force people to file late in the game3.
Some people aren’t procrastinators but owe the IRS and don’t want to pay any sooner than they have to. So they schedule their return to be filed close to the deadline.
Many people buy a little more time—and get reward points—when they pay their taxes using a credit or debit card. “Our users tend to want to pay online using a credit or debit card because they may earn points or rewards of cash back,” said Sheri Chin, vice president of marketing with ACI Worldwide, the largest payment processor for the IRS. “Depending on when they have to pay their credit card bill, they may get extra time to pay.”
A Credit Sesame survey of 500 of the site's users found that those who planned to put their tax bill on plastic are doing so mainly for the points—54 percent chose that as their reason, compared with 27 percent who said they didn't have a solid emergency fund or savings. Eighty-six percent of those charging their taxes say they will pay it off in the next billing cycle.
The older you get, the more likely you are to file on the last day possible, according to a recent Jackson Hewitt survey. Only 3 percent of millennials said they would wait until the last minute, compared with 10 percent of baby boomers, and 13 percent of those age 70 and higher.
Millennials, with their simpler finances, win the early-bird prize, with 28 percent saying that "they filed the minute I received my W-2." About the same percentage said they try to file early to get their refund. None of them planned to file an extension, compared with 2 percent for the other demographic slices.
Then there are the people who aren’t procrastinating but just don’t know they can get money back by filing. Their income may be under the IRS filing threshold of income of $10,300 for a single person and $20,600 for those married and filing jointly, and figure there’s no reason to file4.
That’s not necessarily true. “A lot of college students have money taken out of their paychecks that could be eligible for some tax credits, maybe refundable ones,” Greene-Lewis said. They may be eligible for an Earned Income Tax Credit (EITC) of up to $503 for 2015 with no kids. They may also be eligible for the American Opportunity Tax Credit, worth up to $2,500; 40 percent ($1,000) of that is refundable, she said.
Her own nephews were working while in college and not filing taxes—until she told them that if they got federal taxes taken out of their paycheck, they should probably get money back. Now they file.
A lot of refund money goes unclaimed every year. Right now, the IRS is holding refunds totaling $950 million for people who haven't filed a 2012 federal return.
“We especially encourage students and others who didn’t earn much money to look into this situation because they may still be entitled to a refund,” IRS Commissioner John Koskinen said in a March 10 press release. “Don’t forget there’s no penalty for filing a late return if you’re due a refund.”