Tax Day this year will fall on Monday, April 15th. It’s best to file your taxes early to avoid any complications that may occur. Waiting until last minute can cause you to rush through the tax forms, leading to possible mistakes. If you are not planning on getting an early start, there are a few things you should know. Here are the top last-minute tax tips of 2019.
File on Time
One of the best last-minute tax tips is this — next year, don’t file late! If you’re avoiding filing because you owe taxes and cannot afford to pay, the IRS still recommends filing on time and paying as much as you can as it will reduce potential penalties and interest charges. If you cannot pay any of the taxes you owe, you may file for an installment agreement. You qualify for an installment agreement if you owe $50,000 or less in combined tax, penalties, and interest and if you’re filing for your business, you must owe $25,000 or less in combined tax, penalties and interest for the current year or last year’s liabilities, and have filed all required returns.
Beware of Identity Theft
If you wait till the last minute to file your taxes, someone may have already filed for you. It’s common for identity thieves to use your social security number to file a tax return form in your name. If this happens, you must file a paper return and submit an IRS “Identity Theft Affidavit”, Form 14039. Beware of potential identity thieves by never giving out your social security number over the phone to someone who could be posing as the IRS. The IRS will never call you for confirmation about your tax returns. They will only send a letter asking for information such as your social security number to verify a tax return.
File Online
April 15th is quickly approaching, it’s much easier to file your tax documents online whether it’s directly through the IRS or using tax software. Filing taxes online is more convenient and will save you time. Today’s tax software makes it easy for users to file online for free and without any hassle. They often times have professionals waiting to help you with any questions you may have.
Contribute to an IRA, SEP or HSA
At the end of the tax year, contribute to a traditional IRA, simplified employer pension (SEP), or health savings account (HSA) and you can gain significant savings. Contributions to these types of savings accounts can reduce your taxable income. There are many rules and limitations to this type of contribution so be sure you fully understand them before moving forward.
Decide if Itemizing Deductions is Worth It
Itemizing deductions may significantly lower your tax bill. However, if you have waited until the last minute to file, you might not have the time. Itemizing deductions can be a time-consuming process that produces little or no tax savings for some people. Fidelity states that itemizing can be worth the effort if you pay mortgage interest or real estate taxes, make substantial contributions to charities, have large medical bills, or have large non-reimbursed employee business expenses. If none of these scenarios apply to you, you may be better off taking the standard deduction.
File an Extension If Needed
You may file an extension if you’re not ready to file by April 15, which allows you an automatic six-month extension. You can file for an extension for free using the IRS Free File. Businesses are also able to file a tax extension, which pushes their deadline to September. Filing for an extension will reduce late penalties. The IRS imposes a late filing penalty of 5% per month on any tax due plus a late payment penalty of half a percent per month. Filing an extension will help you avoid the 5% per month late fee.
Tax season can be stressful. If you remember any of these last-minute tax tips, remember this one: file earlier next year! It’s better to file your tax documents early in case any problems arise. Don’t add any more stress into the mix by worrying about your business’s cash flow.
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