The tax deadline of April 18 is fast approaching. If you haven’t done your income tax return yet, it’s time to get cracking.
You’ve got three extra days to file this year because the District of Columbia celebrates Emancipation Day on April 15, so the deadline for filing has been extended to April 18. Residents of Maine and Massachusetts, which celebrate Patriots Day on April 18, have until April 19 to file.
With just a few weeks to go, you may think it’s too late to save any money on last year’s taxes. But there are still a few steps you can take.
“The first thing I would always tell everybody to do before they file their tax return is take a good hard look at last year’s tax return,” says Paul Gevertzman, a partner at Anchin, Block & Anchin in New York City. “If you don’t look at last year’s return, there’s going to be things that you’re going to overlook.”
Before running around seeking deductions, taxpayers may want to estimate whether they are better off taking a standard deduction, which requires less paperwork than itemizing deductions, says Leslie Thompson, managing principal of Spectrum Management Group in Indianapolis.
[See: 9 Red Flags That Could Trigger a Tax Audit.]
For 2015, the standard deduction is $6,300 for a single person or a married person filing separately, $9,250 for a head of household, $12,600 for a married couple filing jointly and $12,600 for a qualifying widow or widower. For someone who doesn’t have a home mortgage or own a business, the standard deduction may be the best option. Tax software usually weighs both options and tells you which is best for your situation.
“Most people just assume that they itemize,” Thompson says. “They don’t.” Those who are on the borderline might want to batch qualifying deductions into one year (paying two years’ of real estate taxes in one year, for example) and itemize every other year.
On the other hand, it’s important to know which deductions you qualify for so you don’t miss out. Most years, for example, you may not have enough medical expenses to qualify for that deduction, since expenses have to exceed 10 percent of your adjusted gross income. But if you experience high medical expenses in a year with a low income, you might be qualify.
“Don’t make assumptions that you don’t qualify for certain deductions,” says Barbara Weltman, a contributing editor for “J.K. Lasser’s Your Income Tax 2016.” “You have to run the numbers.”
If you don’t have all your paperwork together or you just realized you need to find an accountant, you would be wise to seek an extension, which is granted automatically and will give you until Oct. 15 to file your return. “People are afraid of extensions,” Gevertzman says , but they are a good option for someone who isn’t ready. “You make fewer mistakes because you don’t have to rush.”
An extension for filing your return doesn’t give you an extension to pay what you owe, even if you have to make a rough estimate. Even if you can’t pay, it’s important to file on time (or get an extension).
“You want to file to avoid late filing penalties and interest,” Weltman says. If you can’t pay, consider using a credit card (though that incur fees and interest if you can’t pay it off immediately) or asking the IRS for an installment payment agreement. “It’s not a big deal,” she says. “Once you do this, you can sleep at night.”
[See: A Checklist for Last-Minute Tax Filing.]
While it’s too late to make a major dent in your 2015 tax bill, you can still take steps to save big next year.
“The best planning may be getting a head start on tax planning for 2016,” Thompson says, including improving your organization skills. “The earlier you start keeping detailed records, the less onerous is it,” she says.
Here are seven things you can still do to save on 2015 taxes:
Contribute to an Individual Retirement Account. If you have earned income, you can contribute up to $5,500 a year to an IRA, plus an extra $1,000 if you’re 50 or older. The deductibility of your contributions depends upon your income and whether you are covered by a retirement plan at work. You are allowed to make IRA contributions until you file your tax return.
Contribute to a SEP-IRA. The Simplified Employee Pension IRA allows self-employed taxpayers or small business owners (including those who run businesses on the side) to make tax-deductible contributions of 25 percent of compensation, up to $53,000. Depending on income, you may be able to deduct both IRA and SEP contributions. You have until you file your tax return, including extension time, to make those contributions.
Contribute to a health savings account. If your health insurance plan was HSA-eligible, you can contribute up to $3,350 for an individual and $6,650 for a family. Those 55 and older can save an additional $1,000. Contributions are tax-deductible or taken from pretax dollars, no matter what your income. You have until Tax Day to contribute.
Treat your side hustle as a business. If you just started running a part-time business, you might not be aware of all the tax deductions available to business owners, including deductions for a home office, supplies, computers and software. “With so many people having sideline activity, you may be eligible for all the breaks,” Weltman says. “You can even have a retirement plan for your sideline business.” To qualify, you must operate with a profit motive, though you don’t have to make a profit every year. Businessowners usually fill out Schedule C, where they can show their business income and expenses.
File and pay on time. If you don’t file on time and pay on time, you may be subject to interest and penalties. The easiest way to save yourself money is to follow the rules.
File your taxes free and get free advice. If you plan to do your own taxes, look into options for free filing before you pay for software or help. If you make $62,000 or less, you can use software options provided by the Free File Alliance, a coalition of 13 tax software companies that works with the IRS. Higher earners can use fillable forms online. You can also get free help from volunteers certified by the IRS.
[See: 10 Smart Ways to Spend Your Tax Refund.]
Ask for an extension and get professional help. Accountants and tax preparers are busy this time of year, so if you don’t have one, this is no time to start looking. If you get into your tax preparation and discover you need professional help, your best option is to file for an extension, estimate how much you owe and pay it, then look for help after April 15. That will save you from having to file an amended return or missing out on deductions you didn’t realize you were entitled to claim.
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Last-Minute Moves That Can Trim Your Tax Bill originally appeared on usnews.com
