Last Minute Tax Tips
Even if you are the worst of procrastinators, there is still time to make sure you get your taxes filed. With the two extra days you have this year (taxes should be filed by April 17, 2018), you’ll have plenty of time to get your papers in order and consider these tax tips:
Gather all your paperwork
Pull out that pile you’ve been saving and open up your bank statements, year-end investment reports, credit card statements, receipts for individual deductions and the “statement of benefits” from your health insurance company to see whether there are deduction opportunities. Also, pull out last year’s tax return to see what you deducted in 2016. Check all tax forms from your bank, mortgage provider, and financial services provider. If you or your child has student loans, make sure you have the related tax forms for deductible interest.
Those online tax preparation software commercials aren’t wrong – it’s easier, faster and you’re less likely to make a mistake if you file online. You can access the Internal Revenue Service’s e-file service using commercial software, through a professional tax preparer, or directly from the Internal Revenue Service (IRS). If you do file taxes online, you may be asked to enter your adjusted gross income amount from your previous year’s return in order to verify your identity, as an added security measure.
Remember to use money in Flexible Spending Accounts
Because taxpayers don’t pay taxes on money they put in a Flexible Spending Account (FSA), that money must be spent on medical expensive by the end of the annual deadline. Make sure to use that money by booking some appointments at the end of the year (using copays), refilling prescriptions for the next year and buying any needed medical equipment or by buying a new pair of eyeglasses, because if you don’t use funds in your FSA, you’ll lose it.
Fund an Individual Retirement Account
Remember that you have until April 15 to make a contribution that will reduce your taxes for 2017. If you’re married, you can also file an Individual Retirement Account (IRA) for your spouse. If your spouse doesn’t hold a job outside the home, they can qualify for a full IRA contribution and deduction. You and your spouse can each contribute up to $5,500.
File even if you can’t pay
There are penalties for not filing or paying your taxes. But, filing a tax return on time and paying less than you owe isn’t nearly as costly as not filing at all. If you don’t file, you’ll face a failure-to-file penalty. The penalty is 5% of your unpaid taxes for each month your tax return is late, up to 25%. If you file more than 60 days late, you’ll pay a minimum of $135 or 100% of the taxes you owe (whichever is less). On the other hand, if you file a return but don’t pay all that you owe, the late-payment penalty is .5% of the tax owed for every month, up to a maximum of 25%. The late-payment penalty is waived for months in which you also owe the late-filing penalty.
File an extension if you’re not ready
If you don’t have complete information or need more time beyond April 17th, you can get a 6-month extension. But keep in mind that the extension to file is not an extension to pay. You still have to send the IRS the amount of tax you owe by April 17 or face a late-payment penalty. If you choose to get an extension, you can fill out and submit Form 4868, or you can get an automatic extension by estimating your tax liability and making an electronic payment using IRS Free File. You can also request an extension when making a payment through the IRS’s Direct Pay or Electronic Federal Tax Payment System.
Update paycheck withholding
You should regularly update their W-4s with your employer so they continue to get the balance you want. While it’s too late in the year to meaningfully impact their 2017 return, updating your W-4 now means they can start off 2018 just how you want.