Tax season. The time of year when you are inundated with countless cheesy H&R Block commercials, and are left scrambling to locate all of those important receipts you thought you had been carefully putting aside for the past twelve months. Filing taxes, or just even thinking about filing, causes copious amounts of anxiety for lots of people. This is not only because of the uncertainty regarding whether or not you may owe a chunk of change back to the government, but simply because organizing all the essential documents and paperwork is a challenge on it’s own.
In case the anxiety has the best of you (don’t worry – it has the best of me too!) and you are looking for a few tax tips, this post should be of help. Of course, any real tax guidance should be left to your friendly, neighborhood tax professional.
Start early: The earlier you begin to prepare your taxes, the better off you will be. Many companies have stopped sending out W-2’s in the mail, and they leave it up to you to download yours online. The beauty of this is that it allows you to get started on your own terms, instead of anxiously checking the mailbox waiting for your paperwork to arrive. This also applies to paperwork pertaining to bank accounts, retirement funds, loans, etc. Don’t forget to check and see if these forms will be mailed to you, or if they will need to be downloaded, as well. Making sure that you have all the proper paperwork in order is the key to beginning your tax filing process, so don’t procrastinate!
Be aware of the deadline: Taxes are always due on April 15th, right? Actually, no. This year, due to Washington, D.C. celebrating ‘Emancipation Day’ on Friday, April 15th, taxes are actually due on April 18th. And to add to the confusion, if you file in Maine or Massachusetts, your taxes are not due until the 19th, since the 18th is ‘Patriots Day’. But why not tell yourself that taxes are still due on the 15th anyway, to be sure you are on time! Filing for an extension is always a possibly, but two things to keep in mind: 1) It does not give you extra time to pay back what you owe, and therefore you may be charged interest if you underestimate what you owe, and 2) you will also have to file an extension in your state. Both of these are no fun, so try to only use an extension in a true emergency.
Pay a professional: Initially, I thought paying someone to do my taxes was fiscally irresponsible and to be blunt, lazy. But a few years ago, after relocating for a job, I had too many tax-related questions to try to answer on my own, and I felt I had no choice but to hire someone to help. When I saw the difference in my return, I instantly realized the value of investing in a pro. Yes, if you decide to have someone help you file, you are technically losing out on the money that you have pay them. But in actuality, if they are able to find deductions that you didn’t know you even qualified for in the first place, usually the price they charge more than covers itself.
Don’t forget your deductions: If you itemize on your taxes, every write-off adds up. The donation you made to your favorite charity? Write it off. The clothing you gave to Goodwill? Write it off. The interest on your student loans? Write it off! There are so many different deductions that you may be eligible for, that it can be hard to keep up. Be sure to go over the list of possible deductions carefully to make sure that you have everything covered.
Kids, kids, kids: Children are expensive (duh!), but there are a few perks when it comes to claiming dependents on your taxes. Every child (under the age of 18) can be worth up to a $1,000 tax credit. Also, since childcare is one of the most costly aspects of parenting, be sure to calculate your appropriate childcare tax credit. In case you are not taking advantage of it now, something to consider for future tax years – many companies allow you to take money out of your check, pre-tax, in order to pay for childcare (up to $5,000 worth). Feel free to learn more about that here and see what works best for you and your family.
Health care fines: Remember that fines will be assessed if you, or anyone you claim as a dependent, went without health insurance for any part of the year. While you won’t have to actually pay the fine until the 2016 tax year, keep in mind that it is still money to be owed.
There are about a million other important bits of information when it comes to your taxes, but hopefully some of the highlights above make your tax process a bit easier this year. And a big thank you to my audit associate friend Dan for being my fact checker. Happy filing!