Last Minute Tax Tips for the procrastinator
That dreadful time is almost upon us AGAIN. Tax Day. The most dreaded day of the year for some. If you are like a majority of people, you have put off filing till the last minute, and are currently stressed and freaking out. Don’t worry! These 5 tips will help minimize your stress and maximize your tax return.
Most Americans now choose to electronic file using the IRS’ e-file systems, or online software, such as TurboTax, and for good reason: As the Internal Revenue Service mentions, electronic filing programs often calculate most of the figures automatically, saving you time and helping to identify additional deductions and avoid costly errors. You can pay any taxes owed electronically, and refunds often arrive faster, too. E-filing will certainly help save you time AND money.
2. Use an IRA contribution
Traditional IRA contributions of up to $5,500 (or $6,500 if you’re older than 50) may be tax deductible, depending on your income and other factors, according to the American Institute of CPAs (AICPA). Even if you didn’t contribute during the 2015 calendar year, there’s still time. Take advantage of this opportunity to grow your retirement savings and potentially reduce your tax burden by making a last-minute IRA contribution prior to April 15, the AICPA says.
3. Know Tax Code Changes
Recent additions to the tax code affect many Americans. According to the AICPA, some of these changes include:
· A new method for calculating home office deductions. Taxpayers who work from a home office may now be able to use a simpler method to calculate their deduction. The new formula allows workers to simply multiply the square footage of their home office by $5, but note that a maximum of 300 sq. ft. (or $1,500) applies for the deduction under this formula.
· Same-sex married couples filing jointly. Same-sex couples married in jurisdictions where the practice is recognized will be treated as married for all federal tax purposes, even if their state of residence doesn’t recognize the marriage.
· High earners face new taxes. Taxpayers with incomes exceeding $400,000 ($450,000 if married, filing jointly) will face a new 39.6 percent income tax rate and a 20 percent rate on long-term capital gains and certain dividends. Those with adjusted gross incomes over $250,000 ($300,000 if married filing jointly) may also notice they qualify for fewer deductions. Plus, high earners may also be subject to new Medicare taxes. Consult with a tax or financial professional for additional details.
4. Pay taxes in installments
Though most of us would probably prefer receiving a refund, over owing Uncle Sam taxes, there are ways to make the payments a little easier. If you can’t afford to pay your entire tax bill by April 15, don’t fret. The IRS allows taxpayers owing under $50,000 to create an installment payment agreement using an online application or via tax form 9465.
If you absolutely cannot file your taxes by April 15, it’s critical that you file an extension by that date in order to avoid incurring possible penalties and fees. An automatic six-month extension is available via Free File or tax form 4868. Remember, however, that interest or penalties may continue accruing on any taxes owed, so get to work on that payment plan ASAP to minimize the expense.
Get to it, friends! April 15th approaches quickly! And as always, give us a call if you need assistance!