By: The American Academy of Estate Planning Attorneys
New Year’s Day has come and gone, and April 15th looms in the not-too-distant future. While it’s true that many of the big tax planning decisions – like deferring income or bunching deductions – should be made before December 31st, there is still plenty you can do to save money and hassles this tax season. Here are a few simple suggestions:
- Get Organized. Don’t wait until April to begin gathering the information you’ll need to file your tax return. Starting in January, retain all the tax paperwork you receive, including:
- Mortgage and student loan interest statements
- All other tax-related information
If you haven’t already, begin gathering and sorting last year’s receipts. This will put you in the best position to be aware of all the deductions available to you. It will also prepare you to substantiate all the deductions you claim, just in case you’re one of the lucky taxpayers chosen for an audit.
- Fund Your IRA. If you didn’t make the maximum contribution to your IRA before December 31st, you have until April 15th to do so and take advantage of the tax savings. Your contribution is only deductible if you have a traditional IRA, and the current rules are as follows:
The maximum annual contribution is $5,500 if you are under age 50 ($6,500 if you are 50 or older). In order to qualify for a traditional IRA, you must be ineligible to participate in an employer-sponsored retirement plan or you must meet certain income requirements. If you are single, your adjusted gross income cannot exceed $59,000. If you are married filing jointly, it cannot exceed $95,000.
- Pay Attention to Deadlines. You know the deadline for filing your tax return is April 15th, but what happens if you need an extension? You can file Form 4868 to extend your filing deadline to October 15th, but be careful – the form only gives you breathing room when it comes to filling out your tax return. You’re still required to estimate your tax bill and pay the IRS by April 15th. Failure to pay on time can result in a penalty.
- Dot Your I’s and Cross Your T’s. Before you submit your return, make sure you’ve signed it – and take a second look at all the social security numbers you’ve entered, paying special attention to your dependents’ numbers. Failure to include this information for your children can be an expensive oversight – without social security numbers, the IRS will not allow the $3,900-per-dependent personal exemption, nor will it grant you the $1,000 child tax credit applicable to children under 17.
A pain-free tax season starts with planning and organization. Take your time, know the rules, make smart choices, and you’ll save yourself both money and stress as April 15th approaches.