10 Last Minute Tax Tips
Author: Kent Thune
Still haven’t filed your 2015 taxes? You may be a procrastinator, or you may have perfectly good reasons for filing this late in the tax season, but at least you’re not alone. According to the Internal Revenue Service, 20-25 percent of all Americans wait until the last two weeks before the deadline to prepare their tax returns.
At this stage of the game, there are only two primary things you can do: File your taxes quickly or request a tax extension. If you’re in the prior category, this list of last minute tax tips, with a few sympathizing and emotionally supportive points thrown in as an added bonus, can help you get your taxes in order and filed with IRS on time.
1. Don’t panic: Unless you’re reading this story on April 15 and you have complex tax issues, you still have enough time to put together the necessary information and get your form 1040 and any necessary documents together. Panicking will only make things worse and may increase the potential for errors, not to mention that it will make the people around you want to get away.
2. Take advantage of an extra few days this year: There’s great news for late filers in 2016! According to the IRS, via irs.gov) the filing deadline to submit 2015 tax returns is Monday, April 18, 2016, rather than the traditional April 15 date. Washington, D.C., will celebrate Emancipation Day on that Friday, which pushes the deadline to the following Monday for most of the nation. (Due to Patriot’s Day, the deadline will be Tuesday, April 19, in Maine and Massachusetts.)
3. Realize that procrastination isn’t always a bad thing: In the household of your humble author, who happens to be an investment advisor and financial planner, procrastination is defined as “strategic prioritization.” In translation, as it pertains to filing taxes, waiting has its benefits. For those tax payers who owe money, it’s generally better to keep your money as long as possible. This way, you can use your hard-earned cash for more beneficial purposes, such as earning interest or paying down debt, rather than handing it over to the federal government, which doesn’t exactly have as good of a track record of allocating funds as most of us citizens.
4. Add to retirement accounts: You have until April 18, 2016 to make contributions to individual retirement accounts (IRAs). The deductible amount for a contribution to a traditional IRA (if you qualify to take the deduction) is up to $5,500 per person, and up to $6,500 per person if age 50 or older.
5. Get organized quickly and simply: If you don’t have the appropriate forms and supporting documents together yet, it won’t take long to get the basic paperwork organized and in one place.
Start by printing Form 1040, which can be easily found, along with instructions, on the irs.gov website. Grab a file folder or a small box to use as a holding place for necessary documents, which for many filers will include Form W-2, which should have been mailed to you from your employer by January 31; Form 1099-INT, for interest earned, such as from a savings account; Form 1098 Mortgage Interest Statement, which shows mortgage interest paid on a loan for your own home; and finally your receipts for all purchases and payments, including those for business, healthcare and education. For a more complete list, do a Google search for “TurboTax tax preparation check list” and you’ll have a quick reference for what you’ll need.
6. File your taxes electronically: Once you have the appropriate documents together, you’re ready to file. But when it’s last-minute filing, every minute counts. Therefore, electronic filing online can be a good idea. Plus, you can get a more accurate tax return and a faster refund, if you’re expecting one. According to the IRS, nearly 1 billion people have filed their taxes electronically since 1990, and 70 percent of individual taxpayers file electronically, either on their own or via a tax preparer.
7. Avoid last-minute mistakes: Some of the most common errors on tax returns are minor mistakes made because of carelessness. One incorrect number on a Social Security number can cause a delay in a refund or a bigger problem. According to TurboTax, the most common mistakes made by flustered filers are math errors (easily prevented with a calculator or tax software), incorrectly written Social Security numbers and failure to sign or date the tax return. Take just a few extra minutes and proofread!
8. Consider an extension: It’s generally wise to avoid filing extensions, but this may be your best option. To request an extension for filing your return, use Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, which is available for download at irs.gov. As with Form 1040, the extension request must be filed no later than midnight on April 15 (April 18 for 2015 taxes filed in 2016). Keep in mind that an extension of time to file is not an extension of time to pay taxes owed, so be sure to pay your estimated balance, or as much of it as possible, even if you request an extension. And if you can’t afford the payment, tax experts recommend calling the IRS to discuss setting up a payment plan.
9. Seek professional advice: It’s never too late to get professional advice. Although the article you are reading may provide a few useful tips, and it was put together by a Certified Financial Planner ™, it’s not tax advice. Therefore, this tip doubles as a disclaimer! If you need help, it’s a good idea to consult a tax advisor, not a magazine, website, friend, or a financial professional other than a tax advisor.
There are plenty around the Lowcountry who are well-suited to provide the help you need, and they are no strangers to last-minute tax filing.
10. Start early: Although it’s a bit late to put this final tip to use for tax year 2015, hold onto all the notes you made about filing your return this April and start keeping organized records of everything you’ll need for 2016 and beyond. By taking brief and simple steps toward the year’s tax filing, you won’t be stressed in the future.
Kent Thune is a money manager and the owner of a Hilton Head Island investment advisory firm, Atlantic Capital Investments. He is also a freelance writer and is currently working on a book to be published later in 2016. You can follow his musings on mind, money and mastery of life at TheFinancialPhilosopher.com or on Twitter @ThinkersQuill.