Still haven’t filed your tax return? You’re certainly not alone! According to the IRS, between 20-25% of taxpayers file in the two weeks before tax season ends. This year Tax Day is Tuesday April 17th.
While we’ll discuss a few last-minute ways to cut this year’s tax bill, surprisingly, the most important tax tips we can recommend…Start planning for next year’s taxes!
Since most provisions on the biggest tax overhaul in three decades took effect January 1st, learning the changes’ effects—especially on paycheck withholding and deductions—now could spare you from a surprise tax bill next spring.
Here are the most important steps to ensure a surprise free 2018 tax season, as well as some last-minute tax tips for this year.
Tax Tips For Your 2018 Returns
1. Project Your Taxes For 2018
Now is the perfect time to estimate your taxes for 2018 since you already have the necessary information right in front of you! If your income will stay about the same next year, plug the information from your 2017 return into one of the many online calculators. Many tax preparers are also providing clients with projections.
According to the Tax Policy Center, the majority of tax filers (about 65%) will see a lower tax bill in 2018, 6% will see a raise, and the rest will maintain the status quo.
2. Look At Withholding & Estimated Payments For 2018
Have you noticed a bump up in your paychecks this year? If so, it’s because U.S. officials have revised the tables employers use to withhold taxes from paychecks.
Since these changes are broad-based and imprecise, you’ll want to do some investigating for your specific situation. Even if you’re getting an overall tax cut, your withholding may need to be adjusted so you don’t owe a lot more than expected next year. You can use the new IRS withholding calculator to determine if you need to adjust your take-home pay.
If you make quarterly payments of estimated taxes, you should also see where you stand. See the IRS’s new Form 1040-ES for 2018.
3. Rethink Charitable Deductions
The huge changes in charitable giving laws altered exemptions, deductions and credits. Specifically, the number of taxpayers who are able to deduct charitable donations on Schedule A will go from about 36 million in 2017 to around 16 million in 2018.
If you don’t see yourself filing Schedule A every year, tax tips you may want to consider include “bunching” two or more years of charitable giving into one year to more easily qualify for your tax write-off.
Last Minute Tax Tips For 2017
1. Open Or Add To Your IRA
You’re able to make an IRA (Individual Retirement Account) contribution right up until the deadline of April 17, 2018. You can contribute up to $5,500 for the 2017 tax year. If you’re over 50 years old, you can throw in an additional $1,000 as a catch-up contribution.
Remember, whether you’re able to deduct IRA contributions on your tax return depends on the type of IRA you have, your participation in your employer’s retirement plan and your income.
2. Make Final Contributions To Your HSA
If you haven’t completely funded your HSA (Health Savings Account) for 2017, there’s still time. You can make contributions up until April 17 – and still deduct it on this year’s return. Remember, this only applies to you if you set up your account by the end of 2017.
Need An Extension?
Finally, if you’re unable to meet the April 17 deadline to file your federal return, you can request an automatic six-month tax extension from the IRS. Use Form 4868 and file it electronically via the Free File link on IRS.gov.
Remember: An extension to file is not an extension to pay. You must pay 90% of your total tax bill by April 17, to avoid any late-payment penalties. An underpayment will incur an interest charge, which rose to 5% annually as of April 1.
*Disclaimer: Citywide Home Loans does not provide tax planning services or any other service apart from lending. You should always consult with your legal, tax and financial advisors to determine which strategy is the most suitable for your specific circumstances.