We're in the home stretch for tax filing season, and if you're one of the 30 million-plus Americans who hasn’t filed yet according to the IRS, then we’ve got the information you need to make your last-minute filing as seamless as possible.
Remember, the filing deadline is April 18th this year – not the 15th. Why? Emancipation Day. It’s April 16th, and since it falls on a Saturday this year, the DC-folks (who recognize it as a holiday), are marking it on the 15th, so we all get a few extra days to do our taxes. (Thanks, DC!)
The good news is that that’s about the only change this year, says Greg Rosica, contributing author to the EY Tax Guide. “A lot of things stayed the same except for the filing date.”
To make this year's tax filing deadline, here are some helpful tips to go by:
1. Go electronic
The IRS is expecting approximately 85% of taxpayers to e-file this year – and it’s a smart move if you’re filing near the deadline. You get confirmation that your return has been received and that it’s in good shape quickly and you get your refund back faster. Most importantly, since people tend to make more mistakes closer to the deadline, it lessens the likelihood of them. On average, 20 percent of paper returns have an error, compared with 1 percent of electronic returns. Don’t get overconfident though - your computer will get the math right, but you could put the numbers in wrong. Make sure you double-check before sending them in.
2. Get organized first
Start by grabbing your income statements – your W-2s and 1099s – and make sure those numbers are correct. Ideally, you did this when you received them, but if you didn’t, and they’re wrong, get in touch with the business or employer and try to get it corrected before you file, says Rosica. If the numbers on your forms don’t match the numbers the IRS received, your return will get kicked back. Next, pull out last year’s tax return and use it as a guide. You’ll see which credits and deductions you might qualify for again and any carryovers from last year (via charitable contributions or capital losses). It will also help you make sure you have all the property paperwork, like bank accounts you should have received interest statements for.
3. Survey your life
When it comes to choosing deductions and credits, let your life be your guide. Don’t let the hundreds of deductions available overwhelm you. Instead, focus on your life and any changes that have happened in the past year.
Here, a few examples:
- Job hunters: If you changed jobs within your field, make sure you saved all the records and receipts for job hunting expenses – which you can deduct if they (and your other miscellaneous deductions) exceed 2% of your adjusted gross income.
- New parents: Look at the child credit, worth up to $1,000 for every child in your care under age 17, as well as dependent care credit worth up to 35% of your child care expenses (you're eligible if you pay for care while you work or are looking for work), and don't forget the Earned Income Tax Credit for low to moderate income filers.
- Recent graduates: Don’t forget you can deduct up to $2,500 in student loan interest, or that you, too, might be eligible for the earned-income tax credit (if you earn less than about $15,000 a year).
Factor in retirement. First, if you can, make an extra contribution to your IRA before the 18th. For 2015, you can contribute $5,500, plus another $1,000 if you’re 50 or over. While you’re there, automate next year’s contributions so that you aren't scrambling come April 2017. Next, look into the Saver’s Credit for contributing to retirement. Many eligible taxpayers don’t know about it, according to the Transamerica Center for Retirement Studies. If you’re single earning less than $30,500 a year, head of household earning less than $45,750 or married filing jointly and earning less than $61,000, you’re eligible for the savers credit worth up to $1,000 per person – $2,000 if married.
4. Avoid an audit
“The likelihood of being audited if you make under $200,000 is less than 1 percent,” says Lisa Greene-Lewis, CPA and tax expert at TurboTax. That's good news, but how do you avoid being part of that 1%? Know the triggers. These include income mismatches on your 1099s. Also, missing paperwork for charitable contributions exceeding $250, itemized deductions (medical ones, too) that look out of whack with your income, and, for the self-employed, estimations of business expenses instead of exact numbers.
5. Extend if you need to – but pay!
If you're not going to make the April 18th deadline, then file for an extension. You’ll get one, automatically, for six months and you’ll avoid the failure to file penalty of 5 percent per month. But note, this is an extension to file – not an extension to pay, says Greene-Lewis. If you owe taxes, you have to write Uncle Sam a check. Don’t, and you’ll pay interest on the unpaid balance and assess a failure to pay penalty of 1/2 of 1 percent of the unpaid tax per month (up to a maximum of 25 percent). “It’s best to file and pay what you owe within 90 percent of your tax liability to avoid penalties,” she adds.