What Is Tax Season?
Tax season is the time period, generally between Jan. 1 and April 15 of each year, when individual taxpayers traditionally prepare financial statements and reports for the previous year and submit their tax returns. In the United States, individuals typically must file their annual tax return by April 15 of the year following the reportable earnings. Tax returns submitted after the end of tax season are subject to late penalty fees and interest charges.
How To Calculate The Tax You Owe
- Tax season is the time period within which individuals and businesses prepare and file their income taxes.
- In the United States, tax season is typically Jan. 1 until the April 15 filing deadline.
- In 2020, the deadline for filing and paying 2020 taxes was extended to July 15 because of the COVID-19 pandemic.
- During tax season, employers, financial custodians, and other entities that generate income for individuals must provide documentation and statements for tax preparation purposes to ensure taxes are filed on time.
Understanding Tax Season
The tax season is the period within which all income taxes must be filed up until the deadline. The deadline each year is set on April 15. However, if this date falls on a weekend or holiday, it is moved to the next business day. For instance, April 15, 2018 fell on a Sunday, and Monday, April 16 was a holiday—Emancipation Day. Therefore, taxpayers had until Tuesday, April 17, 2018 to file their 2017 tax returns and to pay any taxes due. Tax returns submitted after this date are subject to late penalty fees.
In 2020 because of the COVID-19 pandemic, the deadline for both filing and paying 2019 income taxes was extended to July 15, 2020. The period for paying the first installment of 2020 estimated taxes was also extended to that date.
During tax season, businesses must furnish employees, contract laborers, and others, such as royalty earners, with tax documents specifying data required to complete an individual's tax returns. People who are required to file a tax return must do so by April 15 or request an extension.
Tax season is a busy period for many tax preparers and accounting professionals. The three-and-a-half month period at the beginning of the year is the time when the necessary paperwork, including wage and earnings statements (such as 1099s or W-2s) is collected to assemble tax returns. While some individuals calculate their own tax returns, many rely on the expertise of tax preparers and accounting professionals to be certain the paperwork is filed correctly and to improve the financial outcome of the tax return. An individual who makes less than $69,000 a year can file taxes for free through the Internal Revenue Service (IRS) Free File program. Individuals must file federal, state, and, in some cases, local tax returns.
The IRS advises that all taxpayers keep copies of their prior-year tax returns for at least three years. In the event of an IRS audit, a taxpayer will be required to present the last three years of his or her documents. In extreme cases, such as suspicion of fraud, they will be expected to show seven years of documents.
According to the IRS, a taxpayer with gross income (all income from all sources) of more than $12,000 will have to pay federal tax. Independent contractors, or what the IRS refers to as "non-employee compensation," must file a return and pay self-employment taxes on any net earnings from self-employment of $400 or more. Employers must provide employees with a W-2 at some point in January. Businesses that hire independent contractors will have to give them their 1099-MISC by a certain date, which will include information regarding non-employee income.
Why Filing Early Can Make Sense
Even though many taxpayers file their tax returns on or by about April 15 every year, there is no need to put it off until the last minute. Indeed, filing an early tax return can make sense for a variety of reasons.
In 2019, despite the government shutdown and changes in the tax law following passage of the Tax Cuts and Jobs Act (TCJA), the IRS said it would begin processing tax returns beginning Jan. 28, 2019. Even if you don't file early, there are reasons to begin preparation as soon as you can.
Starting your filing process early gives you the time you need to collect the evidence you need to claim all of your deductions. You will avoid the headache of the middle of the night stress over figures and receipts. Your accountant will have a more flexible schedule and will probably be able to start working on your accounts immediately. Also, by filing early you will short circuit would-be identity thieves.