Last-minute tax tips: A 10-minute tax guide for procrastinators
If you’ve put off filing your taxes this year and are scrambling to meet Tuesday’s deadline, there’s no judgment here. After all, the renaissance genius Leonardo da Vinci is said to have been a notorious procrastinator, according to biographer Walter Isaacson. Who wants to focus on everyday minutiae when there are frescoes to paint and helicopters to invent?
Lots of people have trouble keeping up with their ever-growing to-do lists, and the tedium of filing taxes is no different. According to the IRS, about one in seven Americans delay filing until the last week.
This is probably something you don’t want to hear, but there’s a risk to waiting until the last minute. When people put the deed off, they also increase the risk of making dumb mistakes, Brian Ashcraft, regional director of corporate stores at Liberty Tax Service, said in an interview.
The most important thing to keep in mind? Meet the deadline — or, at the very least, file your Form 4868 to request an extension so that you avoid accruing late penalties from the IRS. Here are three other pieces of advice to make filing your 2017 tax forms as painless as possible.
Find the right way to file
For most filers, the process doesn’t need to be too painful. For single individuals with uncomplicated incomes, the most time-consuming aspect is probably tracking down the login information for whatever free filing service you used last.
You’ll also need to have your W4 handy, the form from your employer that details your income and tax withholdings, as well as other financial records you plan on using to claim deductions — moving receipts or your student loan interest statement, for example.
Filing your taxes should also be free, if you make less than $66,000 annually and qualify for the IRS’s Free File system. You’ll have a few software options from which to choose.
For the last five years, product recommendation site Wirecutter has recommended TurboTax. For people willing to pay for a little extra hand-holding, Consumer Reports suggests H&R Block Deluxe or TaxAct Plus for beginners and TurboTax Plus for people with more complicated returns.
Don’t miss your deductions
According to the IRS, close to 70% of filers elect to take the “standard deduction,” meaning they don’t usually qualify for each and every deduction they would if they’d decided to itemize. That said, there are exceptions like student loan interest, which can be claimed alongside the standard deduction.
Worried your refund is going to be a bit less than you’d hoped? One of the best last-minute ways to lower your tax bill, Ashcraft said, is to make a last-minute contribution to your traditional IRA.
“You can also still make a contribution to your IRA for the previous year and get the benefits,” Ashcraft said. “So if you have some unexpected taxable income or your refund isn’t what you’d hoped it to be, you can make a contribution for 2017 and reduce your taxable income.”
The benefits here are twofold, since you’ll both reduce your taxable income and buy yourself an appreciating asset. It’s a tax move that’s so good, three-quarters of filers said they thought it sounded illegal in a recent NerdWallet study.
Create a payment plan (if you owe)
Though it’s obviously nice to have a big check on the way, huge tax refunds aren’t necessarily the optimal outcome. The bigger the refund, the more of your money that sat in Uncle Sam’s coffers throughout the year, not gathering interest or helping you cover the bills.
The typical refund is a little more than $3,000, give or take, but if you find yourself owing a little money once the process is over, that’s actually a sign you did your taxes right. Still, it can feel like the IRS is mocking you by making you complete all these forms only to find out you owe money.
If you do owe some cash, remember to pay through the IRS to avoid any processing fees that might be assessed by a third-party service. If the bill is bigger than expected, you can apply for a payment plan, though your balance will accrue interest that’s compounded daily.
On the other hand, a big tax refund is a chance for you to tackle some of those financial priorities you’ve been neglecting. Rather than allowing yourself to feel flush with your new cash, consider earmarking some of your refund for debt repayment, a hard-to-touch savings account for emergencies or your retirement savings.
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