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Hello!  Welcome to our final April 15th Stress Disorder Article!  Hopefully, you now understand what is happening to the tax profession & why April 15th is, well, outdated.  I'm a little excited that the series is ending because there are some exciting changes to retirement & energy-related tax law I'd like to dig into & share. 

Today, you'll learn how the media has utilized the tax “deadline” as an eyeball-catching, fear-arousing, space & time-filling, ad-selling tool.   I'll also debunk one of the most pervasive myths out there - that filing an extension somehow increases audit risk.

If you missed any of our earlier articles, Here are links to the related articles on OA:

How Congress is Killing the Tax Profession

The Necessity & Benefit of Filing an Extension

A Brief History of US Taxation & April 15th

Media Hype & The Audit Myth

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, interviewing scores of last-minute filers - each clutching a clumsily stuffed envelope and rushing to obtain an April 15th postmark.

Media-induced panic gathers attention and makes money.  Their stories fuel barbershop, barroom, and kitchen table discussions about taxation and government theft.  It also contributed to ASD by triggering nightmarish speculation regarding the fate of any poor soul who misses the deadline.

You'll also notice something else about media coverage - they never share the ease and benefits of filing an extension!

The Extension-Audit Myth:  Let's start with this - 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 that predate electronic filing.

First, before E-filing started got adopted early 2000's, the IRS primarily processed returns by hand. It was a daunting and stressful task – wading through growing mountains of envelopes mailed before April 15th.  IRS employees had one mission with regard to early filers – shrink the pile!  There was little time to double-check math and spot strange deductions. But, a month or so 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.

All courses and articles are for informational purposes only and do not constitute tax advice. Taxes are complicated - do not act on course information without consulting a professional. Always refer to treasury regulation before making any tax decision. Read the full disclaimer.

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