If you haven’t filed your tax return, you are not alone. According to the Internal Revenue Service (IRS), millions of Americans wait until the last day to file. If you fall into that number, here are a few tips to help you file this tax season.
1) File an extension.
Remember, if you are not ready to file, there is still something you can do. You can simply file for an extension, using Form 4868 which will allow for an additional six months to file. But be mindful; filing a tax extension does not extend time to pay. Therefore, if you expect that you may owe, you should consider sending a payment to reduce or avoid penalties for failure to pay in a timely manner.
What to do if you owe.
If you find that you do owe, there are a few things you can do. First, you can set up a monthly payment arrangement with the Internal Revenue Service (IRS). This is most often referred to as an installment agreement. However, keep in mind there is a fee associated with this option. Another choice to consider is a short-term payment arrangement. This allows taxpayers to pay the balance in full within 120 days or less. If the taxpayer opts to go this route, he or she will not have to pay any additional fees.
2) Consider an individual retirement account (IRA).
Remember, if you are working on your taxes now and you find that you do owe Uncle Sam, there is still something you may be able to do this season. Taxpayers have until the tax deadline to contribute to an individual retirement account (IRA). Don’t forget this year’s tax deadline is April 18th, which may allow a few extra days.
Generally, taxpayers can contribute to a traditional IRA and deduct up to $5,500 for individuals and $6,500 for those over the age of 50. If you are a small business owner, you may be able to deduct more if you consider a simplified employee pension individual retirement account (SEPIRA). Business owners are able to contribute up to 25% of their compensation or up to $53,000 for the tax year 2016, which may be deductible. To find out more about a SEPIRA, visit the IRS website.
3) Find overlooked deductions.
There are many tax deductions that are often overlooked. If you haven’t filed your tax return yet, consider the following deductions to reduce your tax liability.
Mileage driven for charity and medical
Did you volunteer for your favorite charity? Did you have to travel to your doctor’s office for check-ups and procedures? The mileage traveled can be deducted on your tax return. Keep in mind that you must itemize in order to take the deduction. If you did incur these expenses, you may be able to deduct 19 cents per mile driven for medical purposes and 14 cents per mile driven in service of charitable organizations.
Credit card interest – business
Are you a business owner? Did you make purchases on a credit card for qualified business expenses? While personal credit card interest is not deductible, you can deduct interest if your credit card was used for qualified business expenses. Keep in mind that you must be legally liable for that debt.
Are you starting a new job or pursuing a self-employment opportunity? You may be able to deduct qualifying moving expenses. This includes airfare or mileage and the cost of packing and transporting household goods.
Uber and professional drivers
For those who are earning extra money on the side as a Uber driver, consider these expenses. You may be able to take a tax deduction for mileage driven to your pick up, during your ride and your return trip home. Keep in mind, for the tax year 2016, you are able to take a standard mileage deduction for .54 cents per mile. Keeping a log of these miles can really help cut your tax liability.
Kemberley Washington is a certified public accountant and co-founder of Washington CPA Services, LLC. Follow her on Twitter or connect with her on Facebook. For more personal finance and tax tips, subscribe to her blog at kemberley.com.
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