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- Because of severe winter storms in California, taxpayers can file taxes until October 16, 2023.
- Financial planner and accountant Akeiva Ellis suggests using this time to triple-check the accuracy of your returns.
- The tax extension also gives Californians more time to make IRA contributions.
Between December 2022 and March 2023, California residents experienced historic heavy rainfall and flooding, now considered natural disasters by the IRS.
To accommodate individual taxpayers and businesses affected by the storm, the IRS has extended California taxpayers' filing deadline by six months, to October 16, 2023.
According to the State of California Franchise Tax Board, an extension to file your tax return generally does not mean you also have an extension to pay your taxes. However, taxes for the 2022 filing season do not have to be paid until October 16.
Accountant and financial planner Akeiva Ellis, who sits on the CFP Board of Ambassadors, has three tips for California taxpayers who want to make the most out of the extension.
1. Max out your IRA contributions
An individual retirement arrangement (IRA) is a tax-advantaged retirement account that provides more investment flexibility than a 401(k), which is an employer-sponsored plan.
Your retirement contributions lower your adjusted gross income, which is your taxable income each year. It's harder to go back and contribute more to your 401(k), because it's an automatic retirement savings deduction from each pre-tax paycheck.
But Ellis says you can use the tax extension to max out your IRA contributions and lower your annual gross income. In 2022, the limit for IRA contributions is $6,000 per year, or $7,000 if you're age 50 or older by the end of the year.
Ellis says, "Usually, one of the great things about an IRA is that you can contribute until April. With this specific scenario, taxpayers have been given the opportunity to contribute until October for the prior year."
2. Double- and triple-check your tax filing documents
Ellis also recommends using this time to "cross your t's and dot your i's" on your 2022 tax return.
"Make sure that everything is accurate," she says. "You have more time to consult with professionals."
This is the time to track down any tax documents that can make your returns more accurate, and possibly lead to more tax savings, says Ellis.
3. Plan proactively for next year's taxes
"Just because you have extra time to pay taxes this year, it doesn't necessarily mean that we don't start thinking about 2023 until October, right?" says Ellis.
She says that the tax extension creates a unique situation where a taxpayer is filing their 2022 taxes while preparing for 2023 at the same time. This scenario makes room for "proactive planning," she says.
Ellis says the tax extension "implores people to pay attention to the current years' events so that you're not feeling caught off-guard the following tax year, when that deadline's coming."
Correction: April 14, 2023 — An earlier version of this story misstated when taxes must be paid by California residents this year. They must be filed and paid by October 16.