The 2017 tax deadline is coming up fast. Your federal income tax return needs to be submitted to the IRS by April 18, 2017, or you could face some stiff penalties, and about one-fourth of Americans wait until the last minute to get their returns in. If you're one of them, here are three last-minute pieces of advice you should keep in mind as Tax Day approaches.
Max out your traditional IRA contributions
If you'd like to boost your tax refund, there aren't many options still available to you, with the notable exception of the traditional IRA deduction. Specifically, if you qualify for a deduction for traditional IRA contributions, you can choose to have any of your contributions made before April 18 designated for the 2016 tax year.
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This can be a pretty valuable deduction. For the 2016 and 2017 tax years, you can contribute up to $5,500 per person ($6,500 if you're 50 or older) to a traditional IRA. If you're in the 25% tax bracket, this can translate to an additional $1,375 back in your pocket at tax time.
The traditional IRA deduction is subject to income limitations if you or your spouse are eligible to participate in a retirement plan through your employer. However, if you qualify, I highly suggest that you consider boosting your retirement savings before the tax deadline passes.
Check your tax return for errors, even if you've already filed
Since most people use some sort of electronic filing method, many types of errors on tax returns are much less of an issue than they used to be. For example, simple addition errors are mostly a thing of the past, as tax software programs typically do these calculations for you. Still, certain types of errors are quite common, and can easily trigger a tax audit or cost your money.
Specifically, here are some of the things to double-check for before the tax deadline:
- Make sure your numbers match up. It's easy to miss or add a digit when transferring a number from a W-2 or other tax form -- for example, accidentally claiming that you paid $10,000 in tuition instead of $1,000. The IRS receives copies of the forms employers, brokers, and other organizations send to you, and if the numbers on your return don't match up with the IRS's records, it's an easy way to trigger a tax audit.
- Make sure names are spelled correctly. I'm pretty sure you know how to spell the names of you and your family, but typos do happen.
- Be sure your direct deposit information is correct. The wrong bank account or routing number can cause your refund to be sent to the wrong place or kicked back to the IRS. There is currently no IRS procedure to retrieve lost electronic transfers, and an incorrect account number is a silly reason to risk losing your refund.
Even if you've already filed, it's a good idea to take a few minutes and check these things. If you spot an error, you can use IRS Form 1040X to amend your tax return.
File an extension if you need more time (but still pay your taxes)
If you're struggling to get your tax return finished by the April 18 deadline, the good news is that it's not difficult to get an extra six months to do your taxes. Simply fill out IRS Form 4868 before the regular deadline, and the process is easy and automatic. Once the IRS receives and accepts your extension, your tax return deadline will be pushed to October 16.
However, it's important to point out that an extension only gives you more time to file, not more time to pay. Any balance you owe to the IRS is still due on April 18, even if you receive and extension. In fact, while filling out the extension form, you'll be asked to estimate how much tax you'll owe and pay it when you submit the form.
Any balance not paid by the regular tax deadline will be charged interest at a rate of 4% per year, even if you had a good reason for not paying it on time. On top of the interest, you can also be charged 0.5% of your outstanding balance per month or partial month, as a late-payment penalty. While the IRS will assess interest on an unpaid balance no matter what, late payment penalties won't be charged if you can show reasonable cause for not paying on time (you were out of the country, for example).
