Many US taxpayers wait until the last minute to file their returns. If that is your plan, then now is the time to get on with it.
With the April 15 filing deadline 9 days away, you cannot afford to stall on your taxes any longer.
Here are some tips for tackling that return now that you are down to the wire, as follows:
1. Gather your paperwork before you do anything else
There are different documents you will need to file your taxes, and the sooner you start gathering them up, the sooner you will know if you are missing anything important. If you are a salaried worker, you will need your W-2 summarizing your income and taxes paid during the year. Meanwhile, if you earned income on the side, whether from a job, a bank account, or investments, you will need your associated 1099 forms.
There are additional items you’ll need if you’re itemizing your deductions or filing a Schedule C for business expenses. For example, if you own a home, you will need your mortgage interest statement, as well as a record of how much you paid in property taxes last year. If you are claiming a medical expense deduction, you’ll need receipts for your various copay’s and out-of-pocket costs. If you gave money to charity and want to claim it, you’ll need documentation showing how much you donated to each organization you were generous with. And if you are writing off the cost of mileage on your vehicle, job-related supplies, or work-related travel, you will need receipts and credit card statements showing what you spent.
Do not wait to get this information together. If you find that you are missing a 1099, for instance, you might need time to reach out to your bank or client and ask for it. And if you absolutely cannot t find a record of a business purchase, you will need an opportunity to reach out to the vendor you worked with and ask for a last-minute statement.
2. Be sure to report all of your income
If you are scrambling to file your taxes, you may be tempted to neglect to dig up that missing 1099 from the freelance client you worked for briefly, or the interest statement from your bank that doesn’t seem to be anywhere in sight. Do not do it. For every 1099 form you get, the IRS receives a copy as well, and if the agency has income for you on file that you don’t report, you could end up with an audit situation on your hands.
Keep in mind that you will not get a 1099 form if your earnings from a single company total less than $600. If that is the case, you still need to report that income.
3. Don’t guess at deductions
When pressed for time on the tax-filing front, it can be tempting to estimate your deductions rather than dig through your records to arrive at precise figures. But that’s a mistake that could hurt you. For one thing, if you are off on your numbers and you do get audited, you will face some serious consequences if the IRS catches you in a lie.
Furthermore, in the absence of actual documentation, you might resort to rounding your deductions. For example, if you know you spent roughly $5,000 on a business trip in March, you might list that on your return and call it a day. Doing that could raise suspicions, since that’s almost too perfect a number to be true. So, make however much time you need to get your deductions right to avoid trouble after the fact.
4. If you owe money, consider an IRA contribution
Most filers get money back on their taxes when they file. But if you are in the minority this year, one thing you can do to potentially get out of paying the IRS money is make a last-minute contribution to a traditional IRA. You have until the April 15 filing deadline to get last year’s retirement plan funded, and by doing so, you will exclude more of your income from taxes, thereby reducing what you owe or, in some cases, securing a refund in the process.
For Y 2018, you can contribute up to $5,500 to your IRA if you were under 50. If you were 50 or older, you can contribute up to $6,500.
Note: These limits are $500 higher for Y 2019, but because you are contributing for last year, you must stick to 2018’s limits.
5. File electronically
Saving your taxes for the last minute opens the door to more mistakes. That is where filing electronically can come in handy. Today’s software is designed to not only reduce your likelihood of making an error, but help identify tax-saving opportunities you may not unearth yourself. Furthermore, if you are due a refund, filing electronically will usually put that cash back in your pocket within 3 weeks, but if you file on paper, you might wait 2X as long to get your money.
Filing taxes at the last minute is a common thing to do. Just do not speed through the process to the point where you risk botching your return and losing out for it.
If you really cannot manage to get your return in on time, ask the IRS for a 6 -month extension. That will buy you the time you need if you cannot put your filing together by April 15.
Have a terrific weekend.
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