*Editor’s Note: CC Biz Buzz is a monthly column series that features insightful commentary from a member of the Columbia College Robert W. Plaster School of Business faculty.
Benjamin Franklin famously said, “Nothing is certain except death and taxes,” and for millions of Americans, that certainty is coming home to roost in a matter of days. Yes, it’s that second-most popular time of tax season again…the tax extension deadline. This year, the deadline for filing federal income taxes for most individuals is Monday, Oct. 16. Many of you who completed this task several months ago are likely wondering why anyone waits so long. Others are likely feeling a sense of urgency as they may have forgotten about the task they had been putting off.
So why do so many people delay filing their taxes each year? We all know that taxes are generally due in April each year. We begin to see advertisements from various tax preparation services starting in November or December. Tax Day has become tax season, and like many “seasons,” those in the tax industry are beginning to set the stage for tax consumers earlier and earlier, yet millions continue to postpone until October.
The reasons often given for delaying tax filing are that taxes are too complicated or stressful. Taxpayers are concerned they owe money or worried they might make a mistake. Taxes are confusing and time-consuming, and folks often fear they may be audited. Nearly one-third of all taxpayers file their return in the two weeks before the April deadline each year. Some of this delay is likely due to the various additional forms necessary to file a return these days. Back in the good old days, most taxpayers didn’t own investments or have brokerage accounts that generated various statements, which now seem to come out later each year with various corrections. However, these documents are very common now, along with employees who have stock options, ownership in passthrough entities, and various real estate transactions.
But let’s face it: We don’t just procrastinate when filing our taxes. As a society, many of us procrastinate on a multitude of tasks. I know this as I can often be one of the “tribe” and will often justify my procrastination as a motivator because I work well under pressure. I once saw a T-shirt that read “Procrastinators Unite…Tomorrow” (still one of my all-time favorites). Some psychologists have argued in various studies that procrastination is a coping mechanism that individuals may use to protect their vulnerabilities or self-esteem. A lack of confidence in the performance of a task will often lead to the task being moved further down the to-do list, often rolling over to the next day and so on. Studies have indicated that while there may be some short-term benefits of procrastination regarding stress reduction, the lingering need to complete said task begins to compound the stress. I am often reminded of this as my spouse is the polar opposite of a procrastinator who can be overheard stating what now seems obvious: If we work hard for a little bit on our to-do list, we’ll have more time to relax and play. I have to admit that while I might whine a little bit, I’m always grateful and relieved once we are done.
So, back to Benjamin Franklin and his lasting word of wisdom. Taxes are an inevitable outcome of being in a society. They are indeed complicated, many would argue more so than necessary; they are scary to many, and preparing a return is time-consuming. For those who filed an extension, your time to procrastinate the finalization of this return is quickly coming to an end. For those who did not file an extension, it would also benefit you to file as soon as possible. Many taxpayers delay filing because they fear they owe money they don’t have to pay. The IRS has several payment plan options if this is the case; further delaying the return will only compound the possible interest and penalties. However, people often think they owe, only to find out they are due a refund. The funny thing about tax law is that if you are entitled to a refund, you have a maximum of three years to file the return and receive that refund. If that time passes, the refund you were owed becomes the property of the United States Treasury.
I will close this column with an edited verse from the play Annie: “Tomorrow, tomorrow, I love you tomorrow, you’re always a day away.” But your 2022 tax tomorrow comes to an end Monday, Oct. 16, so all procrastinators must find a way to, in fact, unite for at least this one task until next year.
Dr. Mary Dorn is an assistant professor of Finance in the Columbia College Robert W. Plaster School of Business.