If you haven't filed your taxes yet you are not alone. Roughly one-fifth of all Americans who file taxes do so just days before the IRS deadline. Recent changes to the tax laws are likely to increase the number of late filers as they scramble to make sense of the impact these changes have of their returns.
Here are several tips to help you make sense of the new tax law changes and get your tax return filed before time runs out.
Get Your Stuff Together, Literally
Waiting until the last minute to file your taxes can be stressful and not having your receipts and tax forms in order can compound things. A simple solution is to start keeping receipts and documents in a folder so you are not scrambling at the last minute.
In a recent interview Andrew Wagner, H&R Block Senior Tax Advisor shared with us some excellent tips for preparing and filing your tax return.
Where should a tax payer start if they haven't yet filed their tax return?
Andrew states “If you go to hrblock.com/checklist, we have an organizer where you can go through and start checking things off. Also looking at your prior year tax return. So, take a look at your 2016 tax return see what kind of documents then and compare them with what you have in 2017.”
Take Advantage of Tax Deductions
Every year, Americans leave millions of dollars on the table by not taking deductions for certain expenses on their tax returns. Below are several of the more common tax deductions that have changed for this tax season.
Standard Deductions – For 2017, the standard deduction has increased to $12,ooo for individuals, $18,000 for for Head of Households, and $24,000 for Married Couples and Surviving Spouses.
Mortgage Interest – The cap for mortgage interest has been lowered from $1,000,000 to $750,000.
Educator Expense Deduction – Due to a very vocal back-lash from the public, lawmakers changed their mind and decided to allow Teachers to continue to deduct up to $250 for classroom supplies and expenses.
Interest on Home Equity Loans – Starting with 2017 , the new law no longer allows tax payers to deduct interest on home equity loans (HEL) or home equity lines of credit (HELOC) when the proceeds are used for non-home related expenses like buying and automobile or paying off credit cards. You can still deduct interest on home equity loans used to pay for home improvements.
Prepaid Real Property Taxes – As long as the property tax is assessed and billed by December 31st of the prior year, tax payers may elect to prepay and deduct real property taxes on their federal tax return.
Alimony – Alimony is no longer a deduction and for the payee, alimony no longer has to be reported as income. This effectively shifts the tax burden from the payee to the payor.
Medical Deductions – Tax payers that itemize can now deduct qualified medical expenses that are over 7.5% of adjusted gross income.
Health Insurance Penalty – Under the Affordable Care Act, anyone choosing to not carry health insurance was penalized. This penalty has been eliminated.
Don't Overlook Tax Credits
In addition to tax deductions, many Americans miss out on claiming tax credits which reduce the amount of taxes you owe.
What are the most common types of tax credits tax payers often overlook?
According to Andrew, “Things people are missing out on, credits for taxes paid to other states. So, if you live in one state and work in another, claiming a credit for taxes paid to the other state. Also education credits, so if you’re in college and you have tuition, not claiming a credit for that. Also the filing status being incorrect. Maybe someone lived with you all year that’s a qualifying relative and you claimed the single filing status and you could have claimed the head of household filing status. All of these things add up, and quite a bit of money gets left on the table by people not filing correctly.”
Consider a Retirement Contribution to Your Lower Tax Burden
Before filing, consider your retirement savings situation. Making a contribution to a retirement account can lower the amount of taxes you owe and help improve your finances for retirement. Many employers will match a portion of your contribution to a retirement savings plan so why not take advantage of this free money? Another option available is to max out your contribution to an IRA.
Filing Your Return
What if I don't have the money to pay my taxes? Should I still file my tax return?
“The penalty for not filing your tax return is ten times larger than the penalty for not paying. So, the most important thing is to just get your tax return filed.”
You can setup a payment plan with the IRS and as long as you payoff your tax bill within 120 days, it won't cost you anything. The IRS also has other payment plan options available for those struggling to come up with the funds to pay their tax bill however, the important thing is to file your return on time.
Andrew Wagner, H&R Block Senior Tax Advisor, has been preparing individual and small business tax returns since 2008. He enjoys working with clients and learning their goals and concerns and connecting their life to taxes. Wagner has extensive experience with small business tax returns, multiple state income and working with clients across the globe.
Interview Courtesy: H&R Block