Attention all procrastinators: Tax Day is here, it’s time to face the music. Today is the last day to either file your 2018 taxes or file an extension.
Here are a few tips that even last-minute filers can use to stay of out trouble with the IRS and perhaps even save a few bucks.
Are there any last minute deductions you can still take?
Contribute to an IRA
- You can still contribute to an IRA up until midnight tonight.
- If you’re not covered by a retirement plan at work, you can contribute up to $5,500 (or $6,500 if you’re over 50) and deduct the full amount of the contribution on your tax return.
- Even if you ARE covered by a retirement plan at work, you can still deduct the full contribution if you make less than $63,000 as a single filer or under $101,000 as a married couple filing jointly.
- Contribute to a Health Savings Account (HSA)
- If you’re in a high deductible health plan, you can contribute a maximum of $3,400 (individual) or $6,900 (family), plus an additional $1,000 if you’re over 50.
What can you do if you need more time to file?
Most taxpayers are eligible for an automatic 6-month extension for filing your tax return.
- File for 4868 electronically or by mail.
- It is an extension of the time to file, not an extension of time to pay. You still must make an accurate estimate of your tax due and pay that amount today. If you do not pay today, you will owe interest on the amount due. You will, however, avoid the “failure-to-file” penalty.
- Filing an extension does not increase the chances of an audit.
What should you do if you can’t pay what you owe today?
Even if you can’t pay, you should still file your taxes today. By doing so, you will avoid the 5% per month “failure-to-file” penalty. The maximum failure-to-file penalty is 25% of the tax owed!
- Don’t make a tough situation worse by not filing or ignoring the problem.
- In addition to interest, you will also owe a late payment penalty of 0.50% per month on your unpaid balance.
- The current IRS interest rate is 6%
- Request an Installment Agreement from the IRS by filing online via the Online Payment Agreement Tool or by mail by filing form 9465 – Installment Agreement Request.
- Payment plan requests for less than $10,000 are usually automatically approved with no minimum monthly payment as long as you agree to pay off the balance within 3 years.
- If you owe between 10-25k, you’ll generally have 72 months to pay.
- With an installment plan, the late payment penalty that you owe on the unpaid balance goes down to 0.25% per month.
Bonus Tip – Start planning for next year’s taxes now!
- Tax planning should be a year-long process, not a once-a-year event.
- I talk about how to make tax time less stressful by getting your financial house in order in my new book Secure the Bag: Create the Life You Desire by Managing Your Money Like You Mean It
Listeners can find the book at http://www.securethebag.me