If this is your first tax season as husband and wife, here are four things that will be different this time...
6 Minute ReadTopic: taxes
With less than a month to go, tax season is quickly coming to a close. If you waited until the last minute to file, you may be in full-blown panic mode. But before you worry yourself into a frenzy, stop and breathe. You aren’t the only one. Last year, nearly one-third of Americans still hadn’t filed their taxes two weeks before the deadline, according to the IRS.
Our Facebook fans shared their own accounts of procrastination and the tough lessons they learned from putting off the inevitable. Don’t make the same mistakes. Follow these simple steps to make tax time a breeze (or at least a little less stressful!).
Don’t Fool Yourself into Not Filing
Let’s get one thing straight right off the bat: Ignoring your tax obligation won’t make it go away. Olga M. made that mistake twice and vows never to let it happen again. “For the past two years we have filed on October 15, late. Why? Because I’ve been unorganized and haven’t prioritized [it.] The results? I’ve wasted $150–200 in interest.”
If you’re part of the group that still hasn’t done their taxes, we have some good news: The 2017 tax return deadline is April 18—that’s three extra days to file! However, if you fail to file by that date, here’s what will happen:
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- Due a refund? You won’t be penalized for failing to file—but Uncle Sam won’t give you your money until you do. You have three years from the original deadline to file and still receive your refund. If you still don’t file by then, you can kiss your refund goodbye.
- Owe taxes? You’ll be charged a late-filing penalty of 5% of the taxes owed for each month—or part of a month—that your return is late, up to a maximum of 25%. The IRS also charges a late-payment penalty and interest on your unpaid taxes starting the date payment is due, even if you filed an extension.
So what if you can’t pay your tax bill and didn’t file an extension? Work with a tax pro to file as soon as possible! Why? Because the late-filing penalty can be 10 times more than the late-payment penalty. The sooner you file, the less you’ll have to pay!
Do Get Organized
We know tracking down paperwork isn’t the most relaxing way to spend your free time. But it’s a necessary part of filing your taxes—and loads more fun than the alternative. So why not go ahead and just get it out of the way? We promise you’ll feel better when it’s done.
Here are a few of the documents you may need to gather:
- W-2 forms
- 1099 forms
- Mortgage interest statements
- Receipts for deductions like charitable giving, childcare, education costs and home improvements
While you’re at it, start a folder for next year’s taxes and file documents as you receive them through the year. This tip helped Rachel H. go from steadfast procrastinator to an early filer. “We’ve procrastinated year after year. The biggest lesson learned? I need to set up an envelope system to keep the receipts I want to find for tax purposes.”
This year, Rachel handed over all her tax documents to her CPA months before the deadline. “If we file for an extension this year, it will be because our CPA needs it, not us.”
Don’t Let a Time Crunch Cost You Money
With the tax clock ticking, it’s tempting to take the standard deduction and call it a day. After all, adding up all your individual deductions—whether it’s medical expenses or state and local taxes—takes time.
But if your expenses in these categories add up to more than your standard deduction, itemizing is your best bet. Why? Because every deduction you claim reduces the amount of income you’re taxed on, lowering your tax bill.
So how do you know what makes sense for you? Ask an experienced tax advisor for advice. A married couple filing a joint return will receive a standard deduction of $12,600 this year, while single filers will receive $6,300.
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Do Consider an Extension
Start now, and you should have plenty of time to file your taxes. If you’re missing documentation, however—or something other than procrastination keeps you from hitting the deadline—you can request a six-month extension. Simply fill out IRS Form 4868 and submit it to the IRS by April 18.
Just be aware that an extension doesn’t buy you more time to pay your tax bill. It simply gives you more time to file. When you request an extension, you must estimate your tax liability (if any) and send payment with your request. You’ll be charged penalties and interest on the amount you owe after April 18.
Can’t cover it all by the deadline? Pay as much as you can when you file for an extension, and try to knock the balance out before the IRS contacts you, which usually takes 30–60 days. If you can’t pay it off by then, the IRS will likely allow you to pay the rest in monthly installments.
Don’t Skimp on Service
When you’re in a hurry to file your taxes, tax software seems like the perfect solution to get the job done. After all, it’s quick, easy and cheap! But can you ever really be sure the computer got it right? What if you enter the wrong information or miss out on a deduction you never knew you qualified for? It happens, and it could cost you big bucks.
A quick tax-prep shop isn’t much better. Sure, you have real people looking at your tax return. But filling out the forms is about as far as their expertise goes. If you want nitty-gritty tax advice on what credits and deductions you qualify for, you’ll need a pro.
When Katherine S. needed assistance with her taxes, she turned to Dave’s tax Endorsed Local Providers (ELPs). “I’m the world’s worst procrastinator, but this year I've got everything together. . . . I have a great ELP.”
Dave’s tax ELPs are either Certified Public Accountants (CPAs) or Enrolled Agents (EAs), which means they’re licensed experts with extensive training in tax law. You can trust your tax ELP to get your taxes right the first time. Schedule an appointment with your tax ELP today!