April 15th Stress Disorder & the Out-Dated Deadline

Every year, from late March until mid-April, tax professionals are overwhelmed by clients experiencing April 15th Stress Disorder, also known as ASD. Most Americans have never heard of ASD, and even fewer know they have it. In this article, I will discuss the symptoms and prevalence of April 15th Stress Disorder and how it endangers the tax profession - just when expertise is most needed. I'll also share a brief history of the April 15th due date and make a (hopefully successful) argument as to why it's time for a change.

ASD Roots & Symptoms

ASD is the irrational fear of filing one’s tax return after its original due date, generally April 15th. Its most common symptom is anxiety (and related ailments). Apprehension grows as the day approaches. Symptoms commonly manifest asfilers realize it’s a few weeks away. Some haphazardly gather their materials and rush to tax professionals’ offices. Others contact their proto check their return’s status, pressing (in various ways) for completion before the dreaded date. Those experiencing more acute ASD lash out if timely completion seems unlikely.

ASD’s Impact on Tax Professionals

Tax professionals suffer from April 15th Stress Disorder, although they are generally not directly afflicted. Instead, their maladies stem from clients experiencing ASD. High blood pressure, insomnia, and depression are widespread. Sadly, hearing of a colleague’s stress-induced hospitalization (or even demise) in the closing days of tax season is not uncommon. A few years ago, your author was affected by ASD and rushed to the emergency room due to uncontrolled high blood pressure – the lack of sleep, stress, and coffee had taken its toll.

The Month-Long Catch-22: It is difficult for many clients to understand the havoc April 15th has had on the tax community. Imagine the weeks before the deadline - dozens of clients simultaneously experiencing ASD and complaining, “but you’ve had my materials for weeks.” The worst part – you are helpless to meet their demand. Why? Because the entirety of each day gets consumed by one of four tasks: 1) Meeting with clients, 2) Responding to their emails, texts, and phone calls, 3) Organizing documents delivered by clients who suddenly realize the April 15th is approaching, and 4) Filing extensions to ensure no client gets hit with the Late Filing Penalty. Preparing returns is not a primary activity.

The exact timing varies from firm to firm. For many, functional workflow disintegrates in the third week of March. By April 10th, most of us ride a wave of loosely reigned chaos. Every free moment gets used for one thing - filing extensions and ensuring no one gets missed.

Tax Professional Tipping Point: Unfortunately, the stress related to April 15th has increased steadily over the past ten-to-fifteen years, causing many accountants to leave the tax world. Others have reduced their client load. Those who can afford retirement are doing just that. When young accountants experience tax season, few decide to make it a career path. Who can blame them? Accounting is a broad field experiencing a shortage of talent. According to Bloomberg, the US has experienced a 17% decline in the number of accountants. Demand for the profession, however, has not decreased, giving accountants significant leverage over employers and their careers. Why would a highly skilled individual endure the stress of tax season with so many other options?

Why Tax Season Became Unbearable

There are four primary reasons:

Growing complexity, the changing purpose of Form 1040, fraud detection/minimization, and America’s evolving financial landscape work together to make the April 15th tax deadline obsolete. Filing an extension has become increasingly necessary, if not wise, for an unprecedented number of filers. Although the IRS has been late to realize it, helping filers overcome April 15th Stress Disorder has become vital for effective tax administration.

How You Can Help Fight April 15th Stress Disorder

Don’t Be A Victim: Knowledge is power. Hopefully, this article has helped you recognize the signs of ASD and the increasing strain the disorder puts on tax professionals. Understanding the origins of the April 15th deadline and the media’s role in stigmatizing the date helps many filers overcome ASD. I’ll share this information below and clarify some lingering misbeliefs regarding extensions and the benefits of filing one.

Understand the History of April 15th: The April 15th deadline (for non-extension filers) has existed for over sixty years. It is an arbitrary date invented by Congress in 1955 when they changed it from March 15th (the original date was March 1st). In 1955, the entire tax return,Form 1040 (click to see the return), including itemized deductions and credits, was a whopping total of four pages.Instructions totaled 16 pages. Now, add two more pages if you own a business or four if you own a farm (including self-employment tax).

That’s it – that’s the whole 1955 1040 Tax Library. A total of four forms and schedules:

1. Form 1040,
2. Schedule C for the self-employed,
3. Schedule F for farmers, and
4. Schedule SE for calculating Social Security and Medicare for business owners and farmers.

Here’s a brief history of Form 1040’s due date. In 1913, ratifying the 16th Amendment (the irony surrounding its passage is quite interesting) established the income tax. State approval occurred surprisingly fast and hung on some familiar rhetoric – it would only apply to the rich who would “finally pay their fair share” back to society. At first, only married couples earning over $4,000 per year and single individuals earning over $3,000 had to file and pay income tax. Such income levels in the early 1900s’ placed filers among society’s elite. For perspective, consider the following: A highly paid union worker in 1923 (ten years after enactment - the earliest year I could find records) earned about $50 per week, or $2,600 per year. Additionally, two-earner households were rare. The result: Only 1% of Americans filed a tax return in the early years of Form 1040’s existence.

The original due date was March 1st, then quickly became March 15th. The reasoning for a March due date was two-fold. First, it gave the filers ample time to collect their materials and complete the simple form. Second, and most interestingly, Congress wanted their returns (and money) before they fled to their summer homes or left the country for vacation.

Now, let’s fast forward to 1955, when the due date changed to April 15th. Because of World War I, the Great Depression, and World War II, the size of government ballooned into a miniature horror of what it is today. Spending and debt soared. Someone needed to pay for it. Who would it be? If you guess the middle class, congratulations.

By 1955, actual (inflation-adjusted) incomes had increased substantially along with the standard of living. As income increased, the Form 1040 filing threshold decreased. The percentage of households required to file returns became close to what it is today. [I have not done the research but am willing to bet that, due to social welfare payments running through today’s 1040, a higher percentage of Americans paid income tax in 1955.]

By 1955, Form 1040 had also become a much-simplified version of today’s tax return. It was only four pages but included sections for types of income, itemized deductions, and personal exemptions. It referenced tables used to calculate tax. Only two credits appeared: One for dividends and another for retirement income. Completing Form 1040 now required math skills and interpreting cross-eyed instructions, making it complex enough to hire professional assistance.

So, why did Congress claim they gave filers an additional month to meet their civil obligation? FORM 1040 HAD BECOME TO DANG COMPLICATED. A secondary (and likely more accurate) reason for changing the due date to April 15th is that the IRS was overwhelmed by the growing number and complexity of returns filed. Employees needed additional processing time before the law required them to pay interest on refunds.

If Congress changed the due date from March to April 15th due to increased complexity, why has the date remained the same for 60+ years? Considering: 1) the exponentially higher difficulty of today’s tax return vs. 1955’s and 2) The current state of the Internal Revenue Service (if you have not noticed, it’s a mess), why hasn’t the April 15th due date changed to June or July? Why hasn’t the IRS worked to dispel these extension myths and promote its role in reducing fraud, errors, and the need for amending returns?

Recognize Media Manipulation: The media has played an instrumental role in planting April 15th Stress Disorder into the American psyche. Publicizing the date remains an annual ritual, attracting eyes, ears, and advertiser dollars. Headlines count down the days to the Taxman’s arrival like some dystopian Santa. Although the headlines and stories remain, coverage was far more sensational before electronic filing. Reporters hung around post offices as midnight approached. They staked out the lobbies and interviewed scores of last-minute filers clutching clumsily stuffed envelopes, rushing to obtain an April 15th postmark.

Media-induced panic gathers attention and makes money. It fuels barbershop, barroom, and kitchen table discussions of taxation and government theft. It also contributed to ASD by triggering nightmarish speculation regarding the fate of poor souls who miss the deadline.

Debunk the Extension-Audit Relationship: Tax returns have never, nor are they now, flagged solely because of the date filed. It’s complete nonsense. But, like most fireside tales, the myth may be rooted in two grains of coincidental truth predating electronic filing.

First, before E-filing, the IRS primarily processed returns by hand. It was a daunting and stressful task – wading through growing mountains of envelopes mailed before or on April 15th. IRS employees had one mission – shrink the pile! There was little time to double-check math and spot strange deductions. But, about a month after April 15th, the mountain shrank to a small hill. Workflow became manageable. IRS employees had more time to perform their duties with critical eyes. So, there was a higher chance they would notice errors and anomalies.

Here’s the second grain of coincidental fact. In the early decades of hand-completed tax returns, whose taxes were most likely to go on extension? Business owners and investors. High-earners with inch-thick, super-complex, manually calculated returns. Such returns are more likely to contain unreported income, misapplied deductions, and mathematical errors. It only makes sense that they would also garner more attention.

In either case, filing an extension is not the direct cause of increased scrutiny. Additionally, any correlation went out the window decades ago - when electronic filing and computer algorithms replaced human hands and eyeballs.

Among many tax professionals, a prevailing counter-myth has replaced those of the pre-eflile era. Their speculation holds that filing an extension may reduce audit risk. Why? Because, at some point during the year, IRS attention shifts from current year processing to preparing for next year’s filing season. Programmers are busy writing new code and creating new algorithms; their focus has moved away from the previous tax year. Do these professionals have solid evidence to back up this assertion? Nope.

Why Extensions are Your Friend

I’ve shared the media’s interest in spreading April 15th Stress Disorder and debunked common extension-filing myths. Now, it’s time to familiarize ourselves with the object of our fear and realize that extensions are nothing to shun. They are, on the contrary, a powerful tool providing several benefits. Here are a few attributes that endear the extension to filers and professionals alike:

As mentioned earlier, the Late Payment Penalty is tiny when compared to others. It’s one of the smallest in the IRS catalog. It equals $5 per thousand dollars owed monthly. Compare this to the Late Filing Penalty (eliminated by filing an extension), which is $50 per thousand.

It is important to note that owing tax with an extended return does not mean you owe the Late Payment Penalty. When tax due is less than 10% of the total tax due on the return, it generally does not apply (assuming you pay the balance by October 15th).

Also, the Late Payment Penalty can be difficult to distinguish from a similar penalty called the Estimated Tax Penalty. It’s a little complicated, but if you owed tax the previous year and owe tax on the return again, you may incur the Estimated Tax Penalty regardless of when you file.

Conclusion: Change the April 15th Due Date

Let’s wrap up with a few observations.

First: April 15th Stress Disorder is an actual condition. It is a phobia rooted in a misunderstanding media and popular culture have fanned into irrational fear.
Second: The income tax return function has changed drastically since the 1970s’. Its primary function has become one of social subsidization and financial regulation. Calculating and collecting income tax has become secondary.
Third: Due to the return’s changing function, Form 1040 has grown ridiculously complex, as has the information reporting required by third-party payers.
Fourth: This complexity has increased the time it takes to prepare tax returns while simultaneously shrinking the window to complete them.
And Finally: These factors have placed an undue burden on both Form 1040 filers and tax professionals. The stress of meeting the deadline has placed an excessive strain on the professional tax community, which is the IRS’s most valuable tax compliance asset.

The solution is obvious. It’s time to change the un-extended due date of Form 1040.

Change the Date! In 1955, Form 1040’s due date was changed from March 15th to April 15th because of the burden complexity placed on filers and IRS employees. Let’s put this burden into perspective. In 1939, the entire US tax code was 504 pages long. By 1955, it had grown to roughly 14,000 pages. Form 1040, including all schedules, was four pages long, plus an additional form for business owners and farmers. By 2014 (nearly a decade ago), the US tax Code had grown by over 500% and reached 75,000 pages. It now contains over 1 million words and is longer than the King James Bible, Tolstoy’s War and Peace, and the Harry Potter series.

Common sense, fairness, and effective tax administration all point to one conclusion: The April 15th deadline no longer makes sense and needs to change. I’ll let Congress haggle about the exact date, but June 15th has a nice ring. Until then, I hope this article has helped the reader to understand that filing an extension is the easiest way to cope with this antiquated and arbitrary date. It is nothing to fear and provides a mountain of benefits with a molehill of downsides.