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Tax Education: Everything You Need to Know about the Federal Tax Deadline

Nov 19, 2019 10:30:00 AM

Tax Education: Everything You Need to Know about the Federal Tax Deadline | Botkeeper

Any American with a pulse knows that individuals and businesses pay a plethora of taxes. But it wasn't always that way. Even though taxes have been around since before the inauguration of the United States, they used to be much simpler.

Plus, there wasn't always a federal tax deadline. Crazy, right?!

 

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One of the oldest American taxes is the estate tax. Enacted in 1797, the estate tax was repealed and reinstituted more than once over the years, usually as a way to finance wars.

You might think we’ve had taxes since the Revolutionary War, but it wasn’t until the 1920s and ’30s when the US enacted many new taxes; it was tax-free for most of its earlier history.

Even though taxes weren't always so high, the state of taxation around the globe has snowballed to the point that tax revenues now account for more than 80% of total government revenue in around half the world's countries. That’s a huge amount of government income through taxation!

But how did deadlines come to be? What happens if you file your taxes after April 15? And how can you extend that deadline?

Hold onto your hats, because we’re about to jump into all those juicy tax-related questions!


 

More About the History of Taxes in America

More About the History of Taxes in America | Botkeeper

We know from the first source cited above that the modern estate tax came about in 1916. 

Then the gift tax, which is the amount of tax owed on a gift of money or property from one living person to another, came almost 10 years later in 1924. Corporate income taxes were implemented in 1909, whereas the federal income tax was enacted in 1913.

Sales taxes and social security taxes came about during that heavily taxed period in American history in the 1920s and ’30s.

The alternative minimum tax, another type of federal income tax used to make sure everyone pays their share of taxes (we’re talking about those high earners we all know), was enacted in 1978. To calculate taxable income after allowed deductions, this parallel system uses its own set of rules. It’s kind of like calculating income tax twice, then paying whichever one is higher to the government. They’re clever that way!

While the AMT was created to stop taxpayers from avoiding their "fair share" of taxes, because it isn't indexed to inflation, more taxpayers have become subjected to it over the years. This has resulted in mounting calls for the IRS to either reform or eliminate the AMT tax altogether.


You might also like: Tax Planning for Beginners

 

Why Is the Deadline to File Taxes April 15?

Why Is the Deadline to File Taxes April 15? | Botkeeper

The deadline to file taxes wasn't always April 15. On February 3, 1913, Congress passed the 16th Amendment, which created the income tax.

Any income above $4,000 was taxed, and the first designated tax deadline was March 1 of the following year, probably to give taxpayers enough time to get their affairs in order. Side note: can you imagine making that transition from not worrying about an income tax to suddenly having to hold onto all your financial information?! It’s hard enough in 2019 even when you have bookkeeping software to help 24/7.

Before that deadline was created, the federal government used regressive taxes. They derived their revenue from tariffs on exports and imports, which hurt the middle class significantly because they spent (and still do spend) most of their income on day-to-day necessities.

So back at that time around 1914, the government received 90% of its revenue from those 2 taxes. Then Congress wanted everyone to be taxed fairly, so they created a progressive income tax.

They amended the Constitution because taxes were based on the state population, and that wasn't fair. The 16th amendment gave all taxpayers a year and 6 weeks to file. But only 0.4% of the people did (compared to 84% these days, according to the IRS’ Tax Gap Estimates Report). 

The Revenue Act of 1918 tried to get more people to file by moving the tax deadline to March 15. They also imposed a 77% tax on the highest incomes. Because World War I disrupted trade, the government's revenue from tariffs was significantly lowered.

So many people filed taxes for the year 1918 that by the time taxes were due for the next year, the IRS still hadn't caught up in processing them.

Things didn’t get easier.

When The Great Depression hit, incomes were so low that people stopped paying taxes. As a result, Congress raised the rates and cut exemptions to fund World War II.

Songs were written, and the IRS put posters everywhere reminding people to pay. Soon after, the Treasury Department started withholding tax payments from people's paychecks; that's when the W-2 was born and things started to get even more juicy.

In 1954, President Eisenhower asked Congress to reform the tax code. Congress complied, adding deductions and credits to the tax code. It was then that they pushed the tax return deadline back to April 15, allowing the government to hold onto tax funds just a little bit longer because as the middle class grew, they started having to issue refunds.



 

What Happens When You File Late?

Shocked young woman waking up with alarm-1

Ideally you don’t have to file late, but sometimes life happens (we get that) and you have no other options.

The tax filing deadline is April 15 (except when that date falls on a weekend), and it has been for well over 50 years. Some years it was pushed a day or 2 later, because of Emancipation Day, a legal holiday in the District of Columbia.

But April 15 is here to stay.

Even though the last day to file taxes is April 15, you can file for an extension for your tax filing deadline

If you file your taxes late, the IRS will impose fines and penalties, whether you're an individual taxpayer or a business.

Currently, interest in unpaid taxes is calculated at a rate of 6% per year

Late payment penalties are typically 0.5% per month, every month after the missed deadline.

Plus, you'll still owe interest on any amounts you haven't yet paid. And on top of that, there's a 5% monthly late-filing penalty.

The sooner you pay, the lower your fines and penalties will be.

Many people opt to keep their finance databases and accounting in perfect harmony by using an efficient online bookkeeping program. 


 

What Happens If an IRS Tax Return Is Postmarked on April 16?

What Happens If an IRS Tax Return Is Postmarked on April 16? | Botkeeper

If you file your taxes even a day late, whether you're a business owner or an individual taxpayer, the IRS will charge you.

Even if your tax return is postmarked just 1 day after the deadline, they can and will charge you for a missed month. It’s like when you forget to cancel your trial subscription service (maybe for streaming TV?) before it renews, and then you have to pay for another entire month. #21stcenturyproblems

There's a chance they won't notice or won't care enough to charge you for missing the deadline by only a day, but that’s a dangerous game to play. It's in the IRS’ power to penalize you. So if you file late, even by a day, you're taking a risk.

The deadline refers to the date of the postmark, not the date of receipt. After all, you can't control the mail. All you can do is make sure that your return is postmarked by the day that it's due. But in this day and age, around 90% of all tax filings are done electronically.


 

Your Due Date Might Be Different as a Business Owner

Your Due Date Might Be Different as a Business Owner | Botkeeper

If you have quarterly earnings as a business owner, you'll have to file more than once per year. The one benefit here is that you get to spread your tax payments out over the year, but of course the drawback is that you’re essentially calculating your taxes multiple times a year.

For single-member LLC and sole proprietorship tax returns on Schedule C, taxes must be filed by April 15.

Partnership returns that are on Form 1065 with Schedule K-1 for each partner must be filed by March 15, 2019. The same goes for multiple-member LLC returns on Form 1065 with Schedule K-1 for every member.

Corporation and S corporation returns on Form 1120 S with Schedule K-1 have to be filed by March 15, 2019, for every member.

The rule of thumb for corporations says that tax returns are due, and taxes must be paid on the 15th day of the 4th month after the business' end of the fiscal year. So if a corporation has a year-end date of December 31, they must file and pay their taxes by April 15 of the following year.

Many small business owners are clever and opt to use secure software for all their accounting needs so that they can spend time on other demands of their business and get peace of mind knowing they have the tools to do their accounting correctly.




 

Do I Have to File Taxes by April 15 Even If I Expect a Refund?

If you're due a refund, there's no penalty for filing late. You have 3 years from the original deadline to file. If you submit anytime after those 3 years, you won't get that refund.

If you do file late, however, your refund will also be late. So if you're counting on getting that refund money fast, it's in your best interest to file on time.


 

How Do You Extend Your April 15 Deadline?

For most individuals and business owners, April 15 is the last day to file taxes. If you can't or don't want to file by the deadline, you can always file for an extension.

If you file a tax extension, you'll get an additional 6 months to file your return. If your deadline is April 15, your new tax filing deadline would be October 15.

It is not, however, an extension of time to pay your tax bill. Even if you file for an extension, you should still submit payment for at least 90% of what you project you'll owe. 

If you also pay your bill late, you'll still rack up those penalties and interest on top of what you owe. And remember, if you want to file for an extension, make every effort to do so by the original tax deadline.

Still, the best policy is to file and pay on-time!


 

The Federal Tax Deadline Won't Budge

The Federal Tax Deadline Won't Budge | Botkeeper

Even though the first federal tax deadline only acquired filed returns and paid taxes by less than 1% of the population, times have changed. A lot.

Today in the US, failure to file your tax return or pay your taxes is a crime. And if you're convicted of a tax crime, expect to face hefty fines, and in the worst-case scenario: jail time.

Even if you don't make it that far, the audits and correspondence you'll have to endure if you fail to pay or file can be lengthy, stressful, and demanding. You’re best off avoiding all that by planning year-round, preparing well in advance of your deadline, and filing on-time!

Do you want to alleviate some of your tax stress by acquiring reliable and efficient bookkeeping services?

Check out how Botkeeper can help you take control of your tax scenario and file accurately and on-time!

 

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Aaron Sullivan
Written by Aaron Sullivan

Aaron is a content marketer with a background in writing and editing for social, email, and blogs. His experience is heavily focused on bookkeeping/finance, entertainment, and beer.

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