Tax Tips For Late Starters

If you’ve put off filing your taxes until the last minute, here’s some good news. First, you don’t need to bone up on the new tax law to complete this year’s tax return. For the most part, the Tax Cuts and Jobs Act won’t affect your 2017 taxes.

The second piece of good news is that you have a little more time to file. April 15 falls on a Sunday, an,d because April 16 is a holiday in Washington, D.C., you have until Tuesday, April 17, to file your federal tax return. Your tax-filing strategy as the deadline approaches will depend on your situation.

If you’re confident you’re due a refund…

There’s no reason to sweat the tax-filing deadline. The IRS will gladly hold on to your money until you get around to filing your return — if ever.

If you need more time to prepare your return…

You can file for an extension, which will give you until October 15 to file your tax return. Approval is automatic. Use Form 4868 to file your request. Most tax software programs provide this form.

If you owe taxes…

Filing for an extension gives you more time to file your return, but it doesn’t give you more time to pay taxes you owe. If you can’t come up with the money by April 17, your bill will be inflated by underpayment fines and interest on the balance until you pay it off.

If you need more time to come up with the money owed…

You can ask the IRS for an additional 120 days to make your payment. There’s no fee to set up this agreement, although you’ll owe interest and other fees on the balance until it’s paid off. To request an agreement, call 800-829-1040.

If the amount you owe is large…

Consider requesting an installment plan with the IRS. With an installment plan, you can make monthly payments until the balance is paid off. Taxpayers who owe $50,000 or less can apply online. If you apply online, the setup fee is $149 — but only $31 if you arrange for direct debit from your bank account. If you apply by phone, mail or in person, the setup fee is $225 (or $107 if you have payments debited from your bank account).

Another option is to pay taxes with your credit card. This may appeal to taxpayers who would rather owe money to Visa or American Express than the IRS, especially if they have rewards cards. But while the IRS will accept payments via credit card, it won’t pay the “convenience fees” credit card companies charge retailers. In 2018, the fees range from 1.87% to 1.99% of the balance. If you use tax software to e-file, the fees are even higher: TurboTax charges a 2.49% convenience fee. If you don’t pay off the balance by the credit card due date, you’ll also owe interest.

If you’re simply scrambling to beat the April 17 deadline…

Back in the pre-internet era, many post offices stayed open late on April 15. Some even hired bands to entertain the long lines of taxpayers desperately seeking a pre-midnight postmark. These days, you can file online in your pajamas at the stroke of midnight on Tax Day, but you may end up paying more to file. Some tax software providers increase their prices as the tax deadline approaches. (Some tax software providers have also phased out free tax-filing programs designed to attract new customers. H&R Block’s More Zero program, which was available to taxpayers who filed 1040 EZ and 1040A, along with itemizers who claimed the most common deductions, ended on April 1. TurboTax’s Absolute Zero offer, which provided free tax prep and e-filing for taxpayers who filed 1040EZ and 1040A, expired on March 16. There are still some free options available.)

As you rush to fill out your tax return, make sure you don’t commit these common errors:

  • Wrong Social Security numbers. Make sure the names and SSNs entered for everyone on your return match their Social Security cards. Don’t forget to include SSNs for all of your dependents; otherwise, you may not be able to claim them.
  • Bad account numbers. If you arrange for direct deposit of your refund, triple-check account numbers. Otherwise, your refund could end up in someone else’s account.
  • No signature Sign and date your return. If you’re filing jointly, your spouse must sign, too.
  • E-filing PIN errors. When you e-file your tax return, you’re required to sign and validate the return electronically. In an effort to reduce tax-refund fraud, the IRS will no longer allow you to request an electronic personal identification number to confirm your identity. You’ll need to provide your 2016 adjusted gross income or the PIN you selected last year, plus your date of birth. (If you use the same tax software you used last year, this shouldn’t be a problem. The program will automatically transfer information from last year’s return. If you switch to a new program or use one for the first time, you’ll need to check your 2016 tax return in order to e-file. It’s always a good idea to have last year’s tax return on hand when preparing your return, whether or not you e-file. If you misplaced your return, you can find last year’s AGI with the IRS’s Get Transcript tool.)
  • Don’t leave easy money on the table. The tax overhaul will nearly double the standard deduction, significantly reducing the number of taxpayers who will itemize in the future. With that in mind, many taxpayers increased their charitable giving in 2017. If you were among those who ramped up their donations, make sure you get credit for all of your good deeds. In addition to deductions of cash contributions, you can also deduct out-of-pocket costs for charitable activities, such as the cost of mileage, parking and tolls in connection with volunteer work. If you donated used clothing or other household items during the year, you can deduct the fair market value of those items, too.

If you had a lot of medical expenses last year, you may benefit from one provision in the tax overhaul that applies to 2017 tax returns. Congress lowered the threshold for the medical expense deduction from 10% of adjusted gross income to 7.5% of AGI. The 7.5% threshold will remain in effect for 2018; after that, it will return to 10%.

That’s still a high bar because you can only deduct unreimbursed expenses that exceed 7.5% of your AGI. But if you paid for long-term care last year or a family member’s serious illness, it’s worth gathering your records and receipts. Co-payments, the cost of prescription drugs and treatments that aren’t covered by your insurance (including dental and vision care) are all deductible.