When is tax season, and how is it different from a tax year?

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Tax season, tax year, Tax Day — you may hear those terms a lot in the first few months of every year and wonder what they all mean

Tax season is the time frame when you typically prepare and file your federal income tax return, and it usually lasts from January to mid-April. Tax Day is the day your federal income tax return is due, April 15 for most people. The actual filing deadline can shift in any given year though, as a result of holidays, weekends and other circumstances. For example, in 2020, Tax Day was extended until July 15 because of the coronavirus pandemic.

Tax year may be a bit harder to grasp. While tax season is the period when you’re preparing to file your federal income tax return (with Tax Day being the day it’s officially due), the calendar year in which you earned the income you’re reporting is known as the tax year. Let’s take a closer look at the difference between tax season and tax year.

When is tax season vs. tax year?
Why is this important?
What are some things to know about tax season?

When is tax season vs. tax year?

A tax year is a 12-month accounting period in which most taxpayers earn income, track expenses, and either pay taxes on that income or have taxes withheld from their paychecks. Most people treat the calendar year as their tax year, but there are situations when someone’s tax year can differ from calendar year.

The term “tax season” really refers to the tax filing season — the time frame during which you can file a tax return to report your income and expenses from the most-recent tax year and pay any remaining tax you may owe.

The tax season for the most-recent tax year begins when the IRS starts accepting and processing those tax returns, which can vary from year to year. In 2020, tax season for the 2019 tax year began on Jan. 27. While there’s nothing to stop taxpayers from filing earlier than the start date, the IRS will put those returns aside until processing officially begins.

The last day to file taxes, sometimes called Tax Day, is usually April 15 for most people (July 15 in 2020). The tax-filing deadline can get moved by a day or two each year if April 15 falls on a weekend or holiday.

Why is this important?

Understanding when tax season is can help ensure that you file on time or request an official extension if you need more time to file. And you’ll need to include information about the correct tax year on your return.

If you don’t file your income tax return correctly and on time, you could face IRS penalties and extra interest charges. Here are a few scenarios where you may be charged penalties or interest.

You don’t file on time. The IRS can charge a penalty if you don’t file your return by the tax deadline (whether that’s April 15 or an extended due date). The penalty is typically 5% of the unpaid tax for every full month or partial month your return is late. But the penalty can be as much as 25% of the tax you owe.
You may need to do your federal return before your state. Some states use federal adjusted gross income from your federal return as the starting point for calculating your state income tax obligation. And some states won’t accept a state return if their processing systems can’t verify that there’s a matching federal return.
You don’t pay on time. Even if you get an approved extension for filing your taxes, you still must pay any tax you owe by April 15. If you don’t pay on time, the IRS charges a penalty of 0.5% of the unpaid taxes for every month or partial month that they go unpaid, up to 25% of the amount you owe.
You don’t pay enough taxes throughout the year. You’re supposed to pay tax throughout the year — either through payroll withholding or quarterly estimated tax payments (or even both). If the payments you make throughout the year don’t add up to at least 90% of the total tax you owe for the current tax year, or 100% of the tax you paid for the prior year (whichever is less), then you could face an underpayment penalty unless you meet the criteria for a penalty exception.

What are some other things to know about tax season?

Understanding the difference between tax season and tax year is an important bit of knowledge. But like most things tax-related, there are additional things to know about how a tax season works.

What do you need for tax season?

Many people probably start thinking about their taxes in January. But you might not have all the forms you need to file your taxes at that point. That’s because businesses aren’t required to send W-2 and 1099 forms, two potentially essential forms for tax filing, before Jan. 31.

In January, be on the lookout for your tax forms and start gathering the documents you need to file taxes. If you’re filing your tax return electronically, you’ll also need a copy of the prior year’s tax return.

When should you file?

That’s really up to you, as long as you file before the deadline. There are several advantages to filing as early as possible, though.

The IRS is less busy earlier in the season. That means it could potentially process your income tax return — and refund — quicker.
The sooner you file, the sooner you can get any refund you’re owed. The IRS says it issues most refunds in about 21 days from the date you file. Your state tax refund will depend on your state, as each has its own timeline for issuing refunds. And keep in mind that the IRS says that e-filing, combined with having your refund directly deposited into your financial account, is the fastest way to get a refund.
Filing earlier reduces tax ID theft risks. Tax identity theft, which occurs when someone files a fake tax return in your name, affects thousands of taxpayers every year. By minimizing the amount of time identity thieves have to act, filing early can help reduce the chances they will file using your Social Security number or taxpayer identification number before you do.

Learn how to lower your risk of tax identity theft

Refunds may be delayed for some filers

To reduce the chances of tax-related identity theft, the IRS may put certain taxpayers’ refunds on hold. For example, if you claim the earned income tax credit or the additional child tax credit, you might not get your refund until after mid-February in the year that you file. The IRS will hold your entire tax refund, not just the EITC or ACTC portion.

The IRS typically announces these rules ahead of tax season, so you can know what to expect. And you can always track your refund using the IRS “Where’s My Refund” tool.

Bottom line

Tax season normally consists of the first few months of each year, and you can file your return for the most-recent tax year at any time during the season — including the last minutes of Tax Day. But it’s not a good idea to wait until the last minute to think about your taxes.

The amount of federal income tax you pay throughout the year not only affects how much, if any, refund you’ll get but also how much money you take home in your paycheck each month. You can adjust the amount that’s withheld from your wages by updating your W-4 form.

Not sure what changes to make? The IRS Tax Withholding Estimator can help ensure you have the right amount of tax withheld from your paycheck.

Relevant sources: IRS News Release: IRS Opens 2020 filing season for individual filers on Jan. 27 | IRS: Tax Years | IRS News Release: 2017 Tax Filing Season Begins Jan. 23 for Nation’s Taxpayers, Tax Returns Due April 18 | IRS News Release: 2018 Tax Filing Season Begins Jan. 29, Tax Returns Due April 17; Help Available for Taxpayers | IRS News Release: Reminder: Oct. 15 deadline approaching for taxpayers who requested extensions | Social Security Administration Deadline Dates to File W-2s | IRS: Where’s My Refund? | IRS: Refund Timing for Earned Income Tax Credit and Additional Child Tax Credit Filers | 1040 and 1040-SR Instructions for 2019 Tax Year | IRS Tax Topic No. 306 Penalty for Underpayment of Estimated Tax | Form 2210 Instructions for 2019 | IRS Tax Withholding Estimator

Jennifer Samuel, senior tax product specialist for Credit Karma, has more than a decade of experience in the tax preparation industry, including work as a tax analyst and tax preparation professional. She holds a bachelor’s degree in accounting from Saint Leo University. You can find her on LinkedIn.

About the author: Kim Porter is a writer and editor who has written for AARP the Magazine, Credit Karma, Reviewed.com, U.S. News & World Report, and more. Her favorite topics include maximizing credit card rewards and budgeting. Wh… Read more.