Real Estate Tax Pros

Helping Those Working In and On Real Estate

Why is April 15th the Extension-Filing Deadline?

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 reason (which may be the primary reason if the concern for voting taxpayers was feigned) for changing the due date is that the IRS was overwhelmed by the growing number of returns filed. Employees needed additional processing time before the law required Congress to pay interest on refunds.

But, if we accept the premise that Congress cared about voters and 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 haven’t noticed, let me tell you - 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?

These are legitimate questions. Until they are answered, all we can do is educate filers about the importance of filing extensions and draw the following conclusion:

Conclusion - 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% since 1955 to over 70,000 pages! According to the Tax Foundation, the code now contains over 1 million words. For perspective, the King James Bible contains 788,280 words, Tolstoy’s War and Peace has 560,000 words, and the ENTIRE Harry Potter Series has just over a million.

If you’re a visual learner, the following graph (also borrowed from the tax Foundation) may help illustrate the growing burden Congress has placed on taxpayers and the tax-pro community. Note - The graph itself is over a decade old!

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 my efforts have helped readers understand that filing an extension is the easiest way to cope with this antiquated and arbitrary date. They are nothing to fear and provide a mountain of benefits with minimal downside.