So planning ahead isn’t your strong suit. We’ve got you covered.
No one likes filing taxes, and putting them off until the last minute can add to the stress of the process. You’ve probably got the April 15 deadline ingrained in your brain, but the first bit of good news is that this year you have a little wiggle room since taxes aren’t due until April 18. That’s because April 15 (tax day) falls on a Saturday, and Monday, April 17 is a holiday in Washington, D.C.
While you do have an extra three days to get your taxes done, it’s probably best to start now. Here are some tips for filing your taxes effectively, even at the last minute.
If you’re filing your taxes in April, planning ahead may not be your strong suit. However, a little organization can make the tax-filing process easier.
Stephanie L. Salvatore, a tax attorney in New York, recommends getting year-end statements from your bank, credit card companies, and other financial institutions. These will give you information on your income and expenses. Many even categorize your expenses, and will give you a heads up if something is tax deductible. You’ll also want to gather the various tax paperwork you’ve received (from employers, insurers, etc.) and things like car registrations that can be written off on your taxes.
After you’ve filed you’ll want to hold on to this paperwork, keeping it organized in one place. “It is good to keep these in case of an audit,” Salvatore says.
As part of your preparation be sure to look at the tools on the IRS website. There are many tax guides and answers to common questions there, Salvatore says. People making less than $64,000 can also use a free brand-name tax filing software to prepare their returns through the site.
Even if you make more than that, e-filing is generally considered the most efficient way to file your taxes, and you can do it from the comfort of your own home.
“E-filing is a more accurate way to file and ensures receipt in a timely manner,” Salvatore notes.
Know Your Deductions
Some tax deductions we hear about often, like write-offs for mortgage interest or tuition expenses. Other deductions are hidden and many people forget about them, according to Gail Rosen, a certified public accountant (CPA) in Martinsville, New Jersey.
Charitable contributions are also often overlooked. You can deduct donations to charity, including common donations like clothes or household items. You can also deduct the miles you traveled on behalf of a charity, something that’s important for volunteers to remember.
Sherry Peel Jackson, a former IRS agent and author of How To Stick It To the IRS: Confessions From A Former Insider, says that no-cash charitable contributions to charity are “the best-kept secret” on the tax form.
“This deduction is for giving clothes, toys, furniture and other household items to the Salvation Army, Goodwill, American Kidney Fund, and similar organizations,” she said. “You can deduct thousands of dollars in non-cash charitable contributions every year, and it is all perfectly legal.”
Just be sure to take pictures of all donations and get receipts from the organizations you donate to.
Another commonly overlooked deduction is for job-hunting expenses. If you spent time looking for a job, chances are, you racked up expenses that are tax deductible, regardless of whether or not you’re now in that job.
“Qualifying expenses are deductible even if they do not result in a new job being offered or accepted,” Rosen says.
There is no penalty for filing a tax extension, and having extra time lets you make sure that everything on your return is correct.
“Rushing to get a return done by the deadline is the best way to make mistakes, so never be afraid to file an extension if you need one,” says Thomas C. Butler, an enrolled agent with Acumen Accounting in Sterling, Va.
Some people think that filing an extension will flag them for an audit, but Butler says this is not true, and that as a tax professional he has filed extensions for himself many times.
Filing an extension is easy and approval is automatic, generally giving you until October to file your returns. If you’re using tax-filing software just follow the prompts. Alternatively, you can file an extension online here, or send form 4868 by mail.
It’s important to remember that filing an extension doesn’t extend the deadline for paying taxes due. If you expect to owe money, those funds are due by April 18 even if you haven’t filed your return.
A good rule of thumb is to make sure you’ve deposited 100 percent of your 2015 total taxes by April 18 (or, if you make above $150,000, deposit 110 percent). If your income has been stable and you didn’t owe last year, you’ve probably already hit this year’s benchmark through taxes that have been taken out of your checks.
But it’s worth double checking, since missing payments can result in steep fines. If need to pay estimated taxes you can do that through the IRS’s direct pay portal.
Always File On Time
If you owe money but can’t afford to pay your taxes by April 18 you might be tempted to not file, but that’s the worst thing you can do.
“It is always better to file even if you aren’t able to pay at that time,” explains Sarah McGinnis, a CFP in Madison, Wis. The IRS has two types of fines: failure to pay (which starts at 0.5 percent of taxes owed after the due date), and failure to file (which is 5 percent of taxes owed.) Both are capped at 25 percent of the taxes owed.
“Always file on time, and then work on your payment plan later if you can’t pay in full in April,” says McGinnis.
You can apply for an installment payment plan through the IRS online.