By Chris Mann
April 15th is traditionally “Tax Day” in the U.S. However, April 15th falls on a Sunday this year, and April 16th is “Emancipation Day,” a holiday recognized in Washington D.C. to mark the anniversary of the signing of the Compensated Emancipation Act. Therefore, Tax Day this year is Tuesday, April 17th, which gives procrastinators some breathing room.
If you don’t use an accountant, tax attorney or other tax preparer, and you haven’t started preparing your taxes for 2017, the best place to start is by using the information in your 2016 federal and state returns as a starting point. This will give you a great idea of what information for 2017 that you may need to obtain, as well as point out items you may have neglected in the mad rush to beat the tax deadline.
Nowadays, it seems like the Internet is both a blessing and a curse. With that being said, one benefit to taxpayers is that most information needed for preparing tax returns, such as W-2s and various 1099 forms (i.e., bank interest, student loan interest statements, mortgage interest statements, etc.) are typically available online. Just make sure you haven’t misplaced your username or password!
If you itemize your deductions, make sure you have detailed backup of certain items, such as charitable contributions and business expenses. Although the chances of being audited seem to decrease every year, the easiest way to raise red flags is by being aggressive with certain deductions. In general, keep copies of your tax returns and all supporting information for three years after filing them.
If you find yourself owing money, and you have a traditional IRA or a Health Savings Account, you have until April 17th to make a contribution that will count towards the 2017 tax year and will lower your taxable income. Even if you don’t have a tax liability, it’s not a bad idea to take advantage of contributing towards these types of tax-advantaged accounts.
If you find yourself owing money for 2017, look at what might have triggered that tax liability and, if necessary, make adjustments for 2018. More importantly, if you find yourself getting a tax refund, you shouldn’t celebrate or brag to your family and friends. A tax refund just means that you gave an interest-free loan to the government for 2017. That’s not something to brag about! Most people would rather have that money in their pocket throughout the year. There are many ways to do this, such as keeping an eye on your tax withholding from your paycheck, or if you pay estimated taxes throughout the year, adjusting quarterly tax payments throughout the year if it appears you are or could be overpaid.