5 Last-Minute Tax Tips
It’s almost here again: April 15, otherwise known as Tax Day. If you’ve put off filing till the last minute, consider the following steps to help you minimize tax stress and maximize your return.
1. Save Time and Money by E-Filing
Most Americans now opt for electronic filing using the IRS’ e-file systems or online software, such as TurboTax, and for good reason: As the Internal Revenue Service notes, electronic filing programs often calculate many of the figures automatically, saving you time and helping to spot additional deductions and avoid costly errors. You can pay any taxes owed electronically, and refunds often arrive faster, too.
And for taxpayers earning under $58,000, there’s even better news: The IRS now offers Free File via tax software, enabling you to file electronically at no cost. If you earn more than $58,000, free electronic fillable form filing is available. This method is much like an electronic version of traditional paper tax forms.
2. Reduce Your Tax Burden Using an IRA Contribution
Traditional IRA contributions of up to $5,500 (or $6,500 if you’re older than 50) may be tax deductible, depending on your income and other factors, according to the American Institute of CPAs (AICPA). Even if you didn’t contribute during the 2013 calendar year, there’s still time. Take advantage of this opportunity to grow your retirement savings and potentially reduce your tax burden by making a last-minute IRA contribution prior to April 15, the AICPA says.
3. Important Tax Code Changes to Know
Recent additions to the tax code affect many Americans. According to the AICPA, some of these changes include:
- A new method for calculating home office deductions. Taxpayers who work from a home office may now be able to use a simpler method to calculate their deduction. The new formula allows workers to simply multiply the square footage of their home office by $5, but note that a maximum of 300 sq. ft. (or $1,500) applies for the deduction under this formula.
- Same-sex married couples filing jointly. Same-sex couples married in jurisdictions where the practice is recognized will be treated as married for all federal tax purposes, even if their state of residence doesn’t recognize the marriage.
- High earners face new taxes. Taxpayers with incomes exceeding $400,000 ($450,000 if married, filing jointly) will face a new 39.6 percent income tax rate and a 20 percent rate on long-term capital gains and certain dividends. Those with adjusted gross incomes over $250,000 ($300,000 if married filing jointly) may also notice they qualify for fewer deductions. Plus, high earners may also be subject to new Medicare taxes. Consult with a tax or financial professional for additional details.
4. Installment Payment Agreements
Though most of us would probably prefer receiving a refund over owing Uncle Sam taxes, there are ways to make the payments a little easier. If you can’t afford to pay your entire tax bill by April 15, don’t fret. The IRS allows taxpayers owing under $50,000 to create an installment payment agreement using an online application or via tax form 9465. Be aware that certain fees, interest, or penalties may apply.
5. File an Extension
If you absolutely cannot file your taxes by April 15, it’s critical that you file an extension by that date in order to avoid incurring possible penalties and fees. An automatic six-month extension is available via Free File or tax form 4868. Remember, however, that interest or penalties may continue accruing on any taxes owed, so get to work on that payment plan ASAP to minimize the expense.
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Please note that Allstate Life Insurance Company or its agents and representatives cannot give legal or tax advice. The brief discussion of taxes on this page may not be complete or current. The laws and regulations are complex and subject to change. For complete details consult your attorney or tax advisor.