It’s almost Tax Day, every Fairfax certified public accountant’s favorite day (a break in sight!). For the average American, it’s a date that only means more paperwork, more signatures, more taxes paid. It’s not always fun, but it doesn’t have to be stressful. The 2017 tax filing deadline is Tuesday, April 18.
Haven’t filed your taxes yet?
Though more than half of taxpayers file their returns prior to April, between 10–30 percent of Americans wait until the last few weeks or days to file. If that’s you, don’t panic. There’s still time, but as your trusted Fairfax CPA, we do have to advise you not to delay any further. Extensions are fairly simple, although it is wise to file those with as many accurate numbers, or good estimates, as possible. A common misconception is that an extension will put off paying what you owe. While it is true that an extension buys you an extra six months to file your tax return, it DOES NOT delay the need to pay your tax liability. You must pay the balance owed (or as we said, a good estimate) by April 18 for your federal return, and May 2 for your Virginia return. You will avoid a late payment penalty by paying enough with your extension to ensure you have at least 90 percent of your final liability paid. The following advice will help you file your taxes by the deadline, avoid mistakes, and maybe even boost your refund:
Gather and organize your documents.
When you sit down to file your taxes online, or with a professional tax preparer, be prepared with all of the relevant documents. These include W-2s from your employers, 1099s for investment, retirement, or self-employment income, and receipts for deductible items such as, personal property tax paid, charitable contributions made, and job search or moving expenses. Support for child-care or higher education credits should also be considered.
Double check all the important details.
The most common errors, and those which cause many of the IRS rejections, are simple clerical errors. Check your social security and federal identification numbers. Are your names and your children’s names spelled correctly? Is the address shown with your return accurate? This is especially important if you have changed software programs or accountants.
Maximize your deductions.
The majority of taxpayers assume they’re only eligible for the standard deduction, but the truth is, you may be able to lower your tax liability by utilizing your eligible itemized deductions. If your itemized deductions might exceed the $6,300 or $12,600 allowed for single or married filers, respectively, it is worth checking. (See our earlier blog from February, 2016.)
Take above-the-line deductions.
Whether you claim the standard deduction or itemize on Schedule A, you can still lower your taxable income with certain above-the-line deductions, including moving expenses for a job, alimony paid, the educator expense deduction, the tuition and fees deduction, and if eligible, a deductible IRA contribution.
Filing an Extension.
No reason is required for filing a six-month extension (Form 4868) for your tax return. However, it is important to remember that any tax liability owed should be paid with that extension. Even if you don’t have all your “stuff” together, a good attempt at estimating what that liability will be should be attempted. When filing extensions for our clients, we calculate the liability with as much information available, and then use prior year data to fill in the blanks. And then we pad it a little. It is better, in such circumstances to err on the side of caution. If we find when filing the final return that we have over-estimated the tax due, we either apply the refund to the current tax liability, or request a refund. Filing your taxes, or an extension before the deadline doesn’t have to be a source of major stress. Call Burdette Smith & Bish LLC for the advice and support of your local Fairfax CPA.