Although there were no significant changes in tax law affecting individual taxpayers over the past year, there are still key considerations and helpful reminders to consider when filing any tax return. James A. Chyz, Pugh CPAs Professor of Accounting, Ph.D. program director and Wyatt Family Faculty Fellow in the Department of Accounting and Information Management in the University of Tennessee, Knoxville, Haslam College of Business, offers the following tips for citizens filing their taxes.
Tax Return Preparation Basics
First, note that the last day for individuals to file their tax returns for the 2024 tax year is April 15, 2025, the typical filing date, which is three days earlier than last year’s filing date of April 18. Chyz says taxpayers should try to file their returns at least 24 hours before the deadline because, even if filed electronically, the return is not considered “filed” until accepted by the IRS.
“In some cases, the IRS will reject an electronically filed tax return,” Chyz says. “The extra 24 hours gives the taxpayer time to correct any errors or issues that prevented the return’s acceptance.”
Further, when a taxpayer files a paper return and mails it to the IRS, it is considered filed on the postmark date. To provide extra documentation of delivery and receipt, Chyz recommends taxpayers use certified mail when filing a paper return.
“Finally, as the filing date approaches, taxpayers should ensure they have enough liquidity to cover unexpected tax liabilities,” Chyz says. “Unexpected liabilities are most likely to occur when taxpayers have experienced changes from prior years that impact their adjusted gross income and effective tax rate.”
Some common sources of unexpected tax liabilities include fewer dependents relative to the prior year, filing status changes, the receipt of a bonus not given in a prior tax year, a promotion or job change that increases income, a spouse reentering the workforce (for married filing jointly taxpayers) and receipt of dividends and/or capital gains in a non-tax deferred brokerage account.
Extensions, Tax Planning and Deductions
While taxpayers can file for an extension with relative ease any time before April 15 with Form 4868, an extension does not postpone any payment liability — only the filing of the tax return.
“Taxpayers wanting to file an extension must estimate their income tax due and remit these with their extension,” Chyz explains. “If a taxpayer anticipates a refund, these will not be processed by the IRS until the return is filed. In other words, the IRS will not issue a refund with a Form 4868 alone.”
Taxpayers often assume there are several tax-planning opportunities in the months leading up to April 15, which is inaccurate. Most of a taxpayer’s tax planning should have been completed and implemented by the end of the tax year (i.e., December 31, 2024).
“One significant exception are contributions to a tax-deductible IRA,” Chyz says. “Taxpayers have until the filing deadline to make contributions, but care must be taken to ensure they do not exceed contribution limits.”
It is essential that taxpayers have documentation for any deduction claimed on a tax return, particularly for charitable contributions. Although the IRS does not disclose the algorithms used to determine who to audit, Chyz says ratios of charitable contributions to adjusted gross income are almost certainly an input.
“Another red flag for the IRS is a significant drop in income, or increases in total deductions, relative to prior years,” he says. “Taxpayers should also keep in mind that several forms they receive summarizing income, for instance, W-2s, and most 1099s, are also automatically issued to the IRS.”
Tax Preparation Assistance
Several reputable companies offer cloud-based tax preparation software, and, for taxpayers with conventional sources of income (i.e., wages and interest), Chyz believes this software is generally more than adequate, and most taxpayers can navigate them without issue.
“While this software can adapt to more complicated tax situations — examples being self-employment income, foreign source income and distributions from retirement accounts — the tax return complexity can accelerate quickly,” he says. “In such cases, it could offer peace of mind to pay for ‘audit protection,’ which most cloud-based tax software providers offer for an additional charge.”
If a taxpayer can afford it, it is a good idea to enlist a trusted tax preparation professional, particularly for complex tax situations. Keep in mind that higher-demand professionals are busy at this point in the tax return season, and taxpayers should try to contact one sooner rather than later.
“Don’t be surprised if, at this point in the year, a professional preparer recommends estimating a taxpayer’s liability due and filing an extension,” Chyz says.
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CONTACT:
Scott McNutt, senior business writer/publicist, rmcnutt4@utk.edu
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