Tax Season Essentials: Key Points to Consider Before April 15 Deadline
As the April 15 deadline looms, many taxpayers are feeling the pressure to file their returns. This year’s tax season has proven to be particularly challenging due to new provisions under the One Big Beautiful Bill Act, which include expanded deductions and changes that have raised the average refund amount to approximately AUD 3,500. However, these adjustments have caused some confusion, as indicated by a decrease in the number of returns submitted compared to last year.
For those scrambling to complete their filings, it’s crucial to remember that you can still avert penalties by either settling your tax bill or filing for an extension. Notably, you can contribute to your IRA or Roth IRA for the 2025 tax year right up until the deadline.
Extensions and Penalties
It’s worth noting that nearly all taxpayers can extend their filing deadline to October 15. However, tax payments are still due by April 15. According to Andy Phillips, Vice President of the Tax Institute at H&R Block, the penalty for failing to file is significantly more severe than for failing to pay. Specifically, neglecting to file incurs a penalty of up to 5% of your total tax bill for each month your return is late, capped at 25%, while the failure-to-pay penalty stands at 0.5% of unpaid taxes each month, also capped at 25%.
Phillips advises that requesting an extension, even if you can’t pay by the deadline, is advisable. By doing so, you avoid more severe financial consequences. Right now, there are multiple ways to apply for an extension: you can submit your tax bill online—even just an estimated amount—or file Form 4868 via mail, tax software, or through a tax professional to obtain an automatic extension. However, keep in mind that interest and possible penalties will accrue for late payments, so it’s wise to pay as much as you can by the deadline.
Payment Plans and Tax Changes
If you’re unable to pay your tax bill, you can consider enrolling in a payment plan. For those owing less than AUD 100,000, a short-term payment plan allows you to clear the balance within 180 days without a setup fee. Alternatively, for amounts under AUD 50,000, a longer-term installment agreement can be pursued, though it comes with a setup fee unless you’re low-income.
This tax season also heralds notable changes under the One Big Beautiful Bill Act, prompting some to reconsider itemising their deductions rather than opting for the standard deduction. For homeowners, the cap on state and local tax deductions has increased dramatically from AUD 10,000 to AUD 40,000, primarily benefiting high-income earners with expensive properties in high-tax states.
Additionally, taxpayers can now deduct up to AUD 10,000 for car loan interest on eligible new vehicles and claim deductions for tips and overtime, regardless of whether they itemise or take the standard deduction. Nevertheless, these changes may lead to confusion for some, especially for those employed in industries where overtime tracking wasn’t clearly documented.
Incentives for Seniors
Seniors aged 65 and older are also set to benefit from a temporary increased deduction of AUD 6,000, which married couples filing jointly can claim up to AUD 12,000 if both qualify. While this deduction can reduce taxable income, it is important to remember that it does not provide a dollar-for-dollar reduction in tax bills and is subject to income limits.
In Conclusion
As we approach the filing deadline, it’s essential to be informed about your options and the impacts of the significant changes introduced in this tax season. Understanding these new provisions can help maximise deductions and minimise penalties, ensuring a smoother filing process for all taxpayers. Remember, engaging with an expert or investing time to read up on your tax obligations can save you both money and stress.
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