Last-minute tax tips: 5 easy ways to save time and money if you're up against the deadline
Putting off your taxes until the last minute is only natural, especially if you owe the IRS money. With more people delaying the inevitable this year, procrastinators need to realize that tax day cometh, whether you like it or not.
That means you can't hide under the bed and ignore April 18. To avoid big fines, you'll either need to pay your taxes on time or file for an extension. Keep in mind that ignoring the deadline altogether can cost up to 47.5% in penalties on the unpaid taxes plus interest.
Don't give Uncle Sam any more of your hard-earned cash than you absolutely must. If your back is up against the deadline, hit the pause button on your panic response and get organized instead. Get your paperwork together (W-2 from your employer, 1099s for any investments or freelance work, and a copy of last year's return), and get to work.
Here are a few crucial steps that can ease the anxiety of last-minute tax prep:
1. Get your tax forms online
Never got your W-2 in the mail? Don't panic, because many employers maintain employees' W-2 online. Check with your HR department to find out if yours is posted on a third-party site like MyTaxForm, Tax Form Management or Rapid Tax.
If you can't get your hands on your W-2, file anyway on time, according to GoBankingRates.com. Use form 4852, which is the substitute for the W-2 and just estimate your wages to the best of your ability. If you are anticipating a refund, expect a delay as the IRS will have to verify the information before releasing your refund.
You can also log onto your bank and online investment accounts for any 1099 forms you might need to report interest and capital gains. Many tax programs will even automatically import the forms into their software so you never have to hand type in the numbers. Just be careful that nothing got mixed up during the process, since any errors are on you.
2. Decide if you can do your own taxes
Doing your taxes on your own has never been cheaper or easier, thanks to the many free tax software programs available. These should be your first stop if your taxes are simple (say, just a W-2 or a 1099) and you're broke.
If you want a bit more hand-holding, consider upgrading to paid programs like TurboTax Deluxe ($59.99 for federal returns, plus $39.99 for a state return as of April 10) or TaxAct Plus ($37 for a federal return plus $38 for a state return as of April 10), which offer more technical support in case you get stuck or want to try your hand at itemizing deductions.
If you just can't deal, consider hiring a professional, which could end up saving you money in the long run if you have a more complicated tax situation like owning a home or running your own business. "With more complicated situations, the odds of saving money with professional help are higher," NerdWallet personal finance expert Liz Weston told The Cut.
When looking for a tax professional, make sure they can verify their tax identification number (PTIN). Weston also recommends using someone who is either an enrolled agent (EA) or a certified public accountant (CPA).
3. Look for easy credits and deductions
Whether you do your taxes yourself or hire a pro, be sure not to miss obvious deductions.
Start with your IRA, which you can contribute to all the way up until tax day. An IRA contribution will lower your taxable income, which means you'll owe less money in taxes to Uncle Sam. (Don't have an IRA yet? Here's how to open one.)
If you make less than $30,750 (or $61,500 if married and filing jointly), you can also get a tax credit — known as the saver's credit — on an IRA contribution of up to $2,000, which will save you even more money.
4. Consider getting an extension
If you really don't think you can make it work, you have until October 16 to get your federal tax forms turned in if you request an automatic extension using this IRS form or tax software like TurboTax Easy Extension.
The good news is there's no fee to file for an extension and — here's a myth-buster — filing for an extension doesn't mean you will be audited either, according to Forbes. All you'll need is your social security number, an estimate of your 2016 tax liability, the total amount you paid in 2016 — which includes withholding and estimated payments along with the total amount you are paying with your extension request.
5. Pay what you owe (if you owe)
You read that right — just because you file late, doesn't mean you get to pay late. Instead, it means you need to estimate what you owe and send the IRS a check.
Be careful not to underestimate. "If you are $1,000 off from what you owe, you will be charged interest on the additional amount you owe until you pay," Brian Ashcraft, director of compliance at Liberty Tax Service, told Mic by phone. The interest rate is the federal short-term rate, plus 3%, according to the IRS, which is calculated every three months.
Those who can't pay what they owe to the IRS can workout a payment-plan agreement instead. As with any loan, you make monthly payments, but keep in mind that interest and fees apply.
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