Psychology Plays Role in When You File Taxes

Today’s the day Americans pay the piper. April 15. The last day to pay your income taxes. Whether you filed your taxes weeks ago or plan to join the last minute queue at your local post office is as much a function of psychology as finances.

Financial experts say individual cash flow and return expectations govern how early individuals file their tax forms. People who expect a refund, particularly a large refund, tend to file early. Those with higher incomes and those who owe Uncle Sam money tend to file later. But, particularly this year, psychological forces are skewing normal filing trends.

Psychology often trumps financial considerations in determining when people file their taxes, contends Dr. Steven Krebaum, clinical associate professor of psychiatry at the University of Texas Southwestern Medical Center in Dallas. “Generally, it may be that psychology plays a larger role than economics in decisions of when to file,” Krebaum said in an April 14, 2009 article on UPI.com. More people may be filing later than usual this year out of fear or anger, he suggested.

Fear. Difficulty facing the reality of personal finances after the decimation of investment and retirement accounts has caused many taxpayers to take a “head in the sand” approach and file tax forms later than usual. Putting off filing is a way of avoiding the harsh reality they expect is waiting on the bottom line of their tax form. Unfortunately, not knowing where you stand financially only heightens financial anxiety. It’s better to get it over with. Knowing where you stand financially allows you to act, and action decreases anxiety.

Anger. The government’s bailout of Wall Street, AIG executive excesses, foreclosures, rising personal bankruptcies, the wars in Iraq and Afghanistan, devaluing of retirement funds, loss of personal investments, skyrocketing unemployment — there’s a lot to be angry about and people are focusing their anger on the government. The feeling that government bailouts are being made at their expense has created a taxpayer backlash. Angry taxpayers who chafe at giving the government any more money are paying their taxes at the last possible minute. It’s a legal way of expressing their displeasure.