Last Minute Tips for Tax Season Mania
Tax season is officially upon us, and the April 15 deadline is swiftly approaching. If you’re a tax procrastinator, it’s time to buck up and get down to business / get to work. Rest assured you won’t be alone. One in seven Americans wait to file taxes until the week leading up to the deadline. Here are some last-minute tips to help make this process as painless as possible.
File on time
It may seem obvious, but the IRS instates fees and penalties for late filers for a reason. Failure to file by the deadline will cost you a monthly penalty of 5% of the amount owed. What if you know you can’t pay the amount owed? File anyway. You’ll still incur a penalty of 0.5% of the unpaid balance per month or partial month, but that’s easier to digest than the consequence of not filing at all.
When to request an extension
If you know you aren’t going to make the deadline, request an extension before April 15 via Form 4868 for automatic approval. This will grant you a six-month extension to file, revising your deadline to October 15. However, this is simply an extension for filing and does not grant you any leeway for money owed to the IRS. Failure to pay by the deadline will result in interest and penalties. You can request a separate 120-day grace period to come up with the funds, but you’ll still owe interest and other fees until the balance is paid in full.
Set up an installment plan
If you need more time to pay, you can arrange for an individual installment agreement. The plan allows for monthly payments up to 72 months (about six years) until the balance is paid off. Fees are involved, but auto-debits from your bank account will cut them down some.
Itemize (or not)
It’s quite possible that you’re among the hundreds of thousands of taxpayers who won’t bother with itemizing this year due to the changes in the Tax Cuts and Jobs Act, which increased the standard deduction from $12,600 to $24,000. Unless your itemizable deductions are greater than $24,000, you won’t need to bother with itemizing.
IRA and HSA contributions
Contributions to a traditional IRA are accepted until the tax deadline for the previous year, and they’re deductible on your tax return. This is an obvious and easy way to lower your tax bill at the last minute, baring in mind that the contribution limit is $5,500, or $6,500 for those ages 55 and older. Likewise, HSA funds can be deducted via the “saver’s credit”. Just don’t go over the maximum contribution of $3,450 for individuals or $6,900 for families (those 55 years and older can contribute an extra $1,000).
About the Author
Subscribe to Our Newsletter
If you want to end up owing less money to the IRS after filing your taxes (and who doesn’t?), claiming tax credits and deductions can greatly help to shrink that number. However, because they work in different ways, understanding the difference between a tax credit...
We are nearly two years into the sweeping Tax Cuts and Jobs Act of 2017, the largest major tax reform in over 30 years, and one thing remains clear: strategic tax planning is key to lowering a business’s total tax liability. Below are some tips to think about...
Self-employment definitely has its perks, but being the master of your own ship also means answering to the IRS. Before jumping into your entrepreneurial adventure, make sure to learn the practicalities of self-employment taxes. Below are some crucial points that tax...