What You Need To Know About Filing Your Taxes Last Minute (What You Want To Know Wednesdays)

Crunch time for taxes is upon us. If you wait until the last minute to file your taxes you are not alone. According to the IRS, 20-25% of taxpayers wait until the last 2 weeks of tax season to file their taxes. Taxes can be a dreaded time of year. Some people may want to put off filing taxes because they are concerned about owing money, or simply some may want to avoid the detailed process that can be involved. No matter how you feel about tax season you should not avoid paying your taxes. Failure to file taxes can result in heavy fines. MSN.com brings us an excellent list of ways to stay ahead of your taxes.

1. Know the Tax Deadline

The deadline to file your 2017 personal income tax return does not fall on the usual April 15 this year, because that’s a Sunday, and April 16 is Emancipation Day in Washington, D.C., which is a holiday. So Tax Day falls on April 17, 2018 this year.

2. Have All the Necessary Documents

During the first few months of the year, you’ll probably receive several tax-related documents. These can include:

  • A W-2 form from your employer
  • 1099 forms from other sources of income, such as interest or dividends, or contract or freelance work
  • A 1098 form showing mortgage interest and property taxes paid if you’re a homeowner – do not wait until you are going into your tax person’s office to get this document.
  • Form 1098-E showing student loan interest paid if you have federal student loans
  • Form 1095 showing health insurance coverage
  • Receipts for charitable contributions

Gather these documents together before you sit down to start your return.

3. Know Which Health Coverage Form You Need

Three versions of Form 1095 exist: A, B and C. Form 1095-A will be sent to you if you get your health insurance through the Health Insurance Marketplace. You will need this form to file your tax return. You will receive Form 1095-B if you purchase your coverage directly from an insurer, and if you are covered by an employer plan, you will get 1095-C. These two forms are not needed to file your return, so if you’re getting one of those, you don’t need to wait for it to file.

4. File Electronically

Filing your return electronically, known as e-filing, is the easiest, fastest and most reliable method. You can file taxes online for free with IRS Free File if you make less than $64,000. If your income is higher or you have a particularly complex return, there are a number of reasonably priced tax preparation software programs or services you can use. You can also use a paid tax preparer who is authorized to e-file, although if you’ve waited until the last minute to file, you might have trouble finding one who can fit you into their schedule.

Many software programs will let you file your federal return for free but charge you to file your state return. Read the fine print before you make your choice.

5. Import Your Data

You can import your data into most tax software programs, saving you time and reducing errors. If your employer or financial institution makes this option available, you enter some basic information and the program retrieves the details of your W-2 or 1099 form. If you use the same tax software you used last year, you might also be able to import some of your personal data.

6. Reference Last Year’s Return

If you’re not using the same software program you used last year or are filling by paper, Barsade recommends using the last return you filed as a benchmark for this year’s return. If your tax situation hasn’t changed much, you should have a good idea of what your income will be, the deductions you can claim and which forms you need to file.

7. Consider Making an IRA Contribution

You can make a deductible IRA contribution right up until the filing deadline, so you can contribute for 2017 until April 17, 2018. When you contribute to an IRA, you can deduct the amount of your contribution from your income, which means you’ll pay tax on a smaller amount.

You can contribute up to $5,500 for the 2017 tax year, plus an additional $1,000 “catch-up” contribution if you are over 50 years old. You can deduct your contribution if you meet certain requirements, like not having a retirement plan at work and falling within the income limits.

8. Beware of Careless Errors

Double-check your return and have someone else review it, too. Because you’ve waited until the last minute to prepare your return, you’re more likely to make mistakes, Barsade said.

Be especially careful when entering numbers, including Social Security numbers. Tax software will alert you of math errors, but it won’t detect whether you’ve entered numbers incorrectly, said Barbara Weltman, spokesperson and contributing editor for J.K. Lasser’s Your Income Tax 2018.

9. Take Breaks

Even if you’re down to the wire, don’t try to complete your return in one sitting, particularly if it’s complicated. “Take breaks,” Barsade said. “Don’t sit for eight hours straight. Your eyes are going to glaze over.” Stepping away occasionally from your return will help you come back with a fresh set of eyes and, hopefully, avoid making mistakes.

10. Know the Steps to Take If You Can’t Complete Your Return on Time

 

If you can’t meet the April 17 deadline to file your federal return, you can request an automatic six-month tax extension from the Internal Revenue Service with a Form 4868, Weltman said. You can access the form and file it electronically through the Free File link on IRS.gov. Although you can only file your return with Free File software if your income falls below a certain level, anyone can file for an extension for free using one of the software programs.

11. Pay What You Owe, Even if You File an Extension

An extension will give you more time to file your return and help you avoid a late-filing penalty, but you’ll still have to pay what you owe by the April 17 filing deadline to avoid late-payment penalties and interest, Weltman said.

If you file for an extension, make sure you file your return and pay any tax owed by the tax extension deadline, which is Oct. 15, 2018.

12. File Even If You Can’t Pay Your Tax Bill

“Don’t let your inability to pay prevent you from filing on time,” Weltman said. Avoiding filing your return because you can’t make a tax payment will only make matters worse. There are penalties for filing taxes late.

If you owe but can’t pay, you can limit the damage by filing your return on time. The failure to file penalty is 5 percent of the tax owed each month your return is late, up to a maximum of 25 percent. If you file but do not pay, you will be charged just a 0.5 percent penalty on what you owe each month until you’ve paid it off.

If you can’t pay your entire tax bill, pay as much as possible. You can reduce additional interest and penalties if you pay as much as you can with your tax return, according to the IRS.

13. Know What to Do If You Owe But Can’t Pa

If you can’t pay what you owe by April 17, you can probably apply for an IRS installment plan. “Do it in a preemptive way — don’t wait for assessment,” Barsade said. “If you can convey the message to them that it was an honest, one-time mistake, they’ll work with you. My experience is that the tax agents are not out to get you.”

If you’ve filed your return and owe less than $50,000 in tax, penalties and interest, you can apply for the IRS Online Payment Agreement — which allows you to avoid the hassle of calling the IRS or visiting a field office to apply. The IRS will let you know immediately whether your application has been approved, Weltman said.

14. Start Planning Now for Next Year

Don’t let filing your tax return at the last minute become a habit. “This process should be a lesson going forward,” Weltman said.

Keep tax-related documents organized throughout the year and collect tax forms in a folder as they come in during tax season so you don’t have to scramble to meet the tax-filing deadline. And make sure you have the funds available to pay your tax bill by opening a separate savings account for taxes and setting money aside each month, Barsade said. “When tax season comes, you’ll have the money you need,” he said.

15. File Any Delinquent Returns Now

If you have delinquent tax returns that you should have filed in past years but didn’t, you should get ahead of those now as well. If you skipped a year or two, it could catch up with you down the road, so get your house in order now.

If you have a legitimate reason why you didn’t file a return in a previous year, you might be able to avoid some penalties. Avoid making poor excuses for not filing, because the IRS has probably heard them all. Your best strategy might be to fall on your sword, admit your wrongdoing and correct the mistake by filing now.

 


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