Tax day for the 2019 filing year has been delayed to July 15, 2020 due to the novel coronavirus outbreak and resulting widespread shutdowns. But while you may have more time to get everything done, you still want to make filing as easy on yourself as possible. And of course you want to minimize the amount you pay in taxes.
These tax tips will help you get through the filing process while making sure you don't have to send the IRS any more money than necessary.
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1. Pay attention to deadlines
Filing your taxes on time is essential, even if you're not able to pay the full bill. That's because the failure-to-file penalty is far larger than the fees you'll owe simply for not paying on time.
You'll also want to check with your state to see if it's changed its deadline for 2019 to match the federal one.
2. Get all your paperwork together before you get started
You'll need lots of different forms to file taxes, including W-2s and 1099s that report your income, as well as a 1095-A form if you're entitled to advanced premium tax credits that help you afford health insurance. If you're deducting mortgage interest or student loan interest, you'll also need 1098 forms.
It's annoying to start the filing process and find you're missing information -- especially if you're working with an accountant. So before you sit down to file or set up your appointment with your tax professional, make sure you've got all your documents in one place and ready to go.
3. Add up your potential itemized deductions
Taxpayers have two choices when it comes to claiming deductions that reduce taxable income. They can claim a standard deduction, worth $12,200 for singles, $18,350 for heads of household, and $24,400 for married couples. Alternatively, they can itemize, which makes filing a little more complicated since you claim deductions for specific things.
Since deductions lower your tax bill by reducing the amount of money you're taxed on, you want the largest possible deduction. To find out what's best, add up your itemized deductions and compare the value to the standard deduction for your filing status.
If you score more savings by itemizing, opt for that approach instead of claiming the standard deduction.
4. Take advantage of tax breaks for savers
Some of the best and most valuable tax breaks come from investing money for your own future.
You can invest in a Individual Retirement Account (IRA) -- including a Roth IRA if your income isn't too high -- and can invest in a Health Savings Account (HSA) if you have a qualifying high deductible health plan. The money in these accounts can grow and help support you in your later years or, in the case of HSAs, could also be used to pay for healthcare needs today.
You'll have until the July 15 tax deadline to invest in either type of account for the 2019 tax year, so that gives you plenty of time to make a contribution if you haven't already.
The maximum IRA investment for 2019 is $6,000, or $7,000 if you're eligible for catch-up contributions because you're 50 or over. And the maximum you can put into an HSA is $3,500 for individuals and $7,000 for families, with an additional $1,000 catch-up contribution available if you're 55 or older.
5. Set up direct deposit to get a faster refund
If you're due a refund, getting the money ASAP could be helpful to bulk up your emergency fund during these uncertain economic times -- or to cover costs if your income has been cut due to the COVID-19 coronavirus outbreak.
To get your money ASAP, e-file your taxes and set up direct deposit. If you do, your refund will likely be issued within 21 days. If you mail in your return, it could take six weeks or longer to get your hands on your cash.
Follow these tax tips for this filing year and beyond
By following these simple tax tips, you can avoid penalties for delayed filing, maximize your tax savings, and get back any money you're owed ASAP.
These tips will help you during this unusual tax year, but can also be good to know for upcoming years since it's always important to pay by the deadline and score as many tax breaks as you can.
