Don't Mess With Taxes

Source: CafePress tax jigsaw puzzle

Still trying to put the pieces of your Form 1040 (or 1040A or even 1040EZ) together? Time's running out. Tax Day is almost here.

Since the tax filing deadline is April 17 this year, here are 17 tax tips. Not only do they earn this week's By the Numbers honor, some could help you put together a return to send to Uncle Sam on time and at the least possible tax cost to you.

1. File on time. Yes, this first tip is obvious, but a lot of people let the filing date slip by even in years, like 2018, where we get a couple of more days to send the Internal Revenue Service our tax returns. So set your electronic calendar alarm. Your taxes are due on Tuesday, April 17, by midnight your local time. Or by the time your U.S. Post Office affixed the April 17 postmark if you're snail mailing a paper tax return.

2. Make sure you know, and report, how much you made. A lot of filers need just one piece of income documentation to file, the W-2 form their employer sent them. But others had some side hustles. In some of those cases, a 1099 form was issued. In all these earning cases, the IRS also got copies of these forms. So the agency will know if you forgot any income. That will get you at least a mailed notice and will slow down the processing of your return and issuance of any refund. So double check your tax-related documents and be sure to report all your income, be it from a salaried job, side jobs or even gambling or prize winnings.

3. Decide which deduction method to use. Most taxpayers claim the standard deduction. If you can do that, good. It's easier and the amount to claim if found right on your 1040. For 2017 returns, that's $6,350 for individual filers; $9,350 if you're a head of household; or $12,700 if you and your spouse file jointly. But you want to use the deduction method that gives you the most tax advantage. If you had a lot of expenses last year that you can itemize and they add up to more than your standard amount (adjusted each year for inflation), which is based on your filing status, then you need to itemize. Sorry. It is extra work, but it's worth it when it comes to tax savings.

4. Choose the correct filing status. In addition to determining your standard deduction amount, your filing status also affects some tax breaks you might be able to claim. So make sure you pick the correct one of the five filing status options you can use.

5. Add up your medical costs. These doctor and dentist visits are what prompt many filers to itemize. And if you saw a lot of medical personnel (or had some of the many other allowable medical costs) last year, you get a break this filing season. One of the few Tax Cuts and Jobs Act (TCJA) changes that affects the 2017 tax year is the one that lowered the Schedule A threshold for claiming medical costs from 10 percent to the prior 7.5 percent cap. That reduction is for the 2017 and 2018 tax years.

6. Don't forget about Obamacare. Speaking of medical, don't forget about the Affordable Care Act, aka Obamacare, penalty for not having acceptable medical coverage. That tax price is still in effect for 2017 returns. Most taxpayers will let this IRS know this by checking the box on line 61 of Form 1040, line 38 on Form 1040A or line 11 on Form 1040EZ.

7. Don't overlook other itemized deductions. While medical costs can be a big part of itemized claims, there are other ways to reduce your adjusted gross income to a lower taxable amount. And you want to make sure you claim as many of these itemized deductions that you can on your 2017 return, since many of them will be changed or eliminated in 2018 thanks to the TCJA.

8. Add up your noncash charitable donations. If you're philanthropic, your donations can help if you itemize. But it's not just cash gifts to nonprofits that count. Gifts of clothing and household goods that are in good or better shape also can be claimed at their fair market value. Some miles you drive in your personal vehicle helping out your favorite charity also can be claimed at 14 cents per mile.

9. Contribute to or open an IRA. As noted in my earlier post on 10 tax tasks to take care of by April 17, opening this type of retirement account is one of the few tax breaks you can take after the end of a tax year. You have until the April filing deadline to open an IRA, either Roth or traditional, for the prior tax year. If you're deducting a traditional IRA contribution, it could help cut your tax bill. If you opt for a Roth contribution, that doesn't produce an immediate tax break, but putting money into that account for 2017 will allow you to max out your contributions for that tax year. And by saving as much as you can now, you'll have a more comfortable retirement later.

10. Look into the Saver's Credit. Another bonus to contributing to a retirement account, either an IRA now or any time last year or a workplace plan (including self-employed retirement plans), is that it might allow you to claim the Saver's Credit. This tax break, which by being a credit reduces your tax bill dollar-for-dollar, could cut what you owe Uncle Sam by up to $1,000. There are earnings limits, so not every retirement saver qualifies for the Saver's Credit. But you don't know for sure until you check.

11. Contribute to your Health Savings Account (HSA). Like the IRA contribution rule, you have until the filing due date, April 17 this year, to put money into your Health Savings Account (HSA). This medical account is available to folks covered under a high deductible health plan and gives them a tax-saving way to pay for their larger out-of-pocket high deductible costs. An HSA bonus is its flexibility. You can use HSA funds to pay for current medical expenses, save for future medical expenses or even reimburse past medical expenses incurred after you established your HSA.

12. Don't overlook above-the-line deductions. Contributions to your traditional IRA, your self-employment retirement plan and HSA also can be counted as adjustments to income, or what are popularly known (at least by tax geeks) as above-the-line deductions. These 13+ write-offs found directly on Form 1040 (four of them also are on Form 1040A) help whittle down your total, gross income to your adjusted gross income (AGI). The also include alimony payments, educator expenses and student loan interest.

13. Double check your 1040. I know. By the time you finish filling out your 1040, you just want it gone. But before you drop it into the snail mail box or hit enter, give it another look. If you use tax preparation software, which most of us do, it will do a check for you. But it can't ensure that you entered in the correct amounts. And a transposed earnings amount could make a big difference, for good or ill, on your return. Math mistakes are, year-after-year, among the most prevalent filing errors. You don't want to mess up your tax math or make any of these 12 common filing mistakes.

14. File electronically. That tax software mentioned in #13 typically will let you also file your return electronically, in many cases for free. But you don't have to buy one of the boxed products. If your adjusted gross income is $66,000 or less, you can use the IRS-tax industry's Free File. Here, participating tax software companies will let you use their online products to fill out and e-file your 1040. Even if you do make more, you can use its fillable forms free fling option.

15. File your state taxes. Of the 43 states and Washington, D.C. that collect some sort of income tax, 38 of them and the District of Columbia follow the federal filing deadline. Some of the Free File products allow for free state prep and e-fling, too. Read the offers closely. Or check with your state's tax department. Many of them have their own state free filing systems.

16. Get more time. If you just can't finish your 1040, file for an extension. Submitting Form 4868 by April 17 will give you six more months to finish those forms.

17. Pay what you owe. If, however, you're asking the IRS for six more months because you don't have the monthly to pay your due taxes, fuhgeddaboudit. Filing a Form 4868 gives you added time to fill out your forms, but no extra time to pay any tax you expect you owe for the prior tax year. The form will remind you of this payment obligation, but I'm adding it here again because if you owe, you don't want to make it worse by having that amount increased by the interest and nonpayment penalties that will be added to your bill if you don't pay by April 17. If you don't have the cash on hand but your credit card can handle it, you can use that to e-pay. Note, however, that credit payments include a processing fee charged by the vendors. Or you can set up a payment plan with the IRS by sending the agency Form 9465, Installment Agreement Request, or by using the IRS' Online Payment Agreement Application. In any case, pay as much as you can toward your bill to show the IRS that you know you owe and you're trying to meet your tax obligation.

Yeah, I know this is a lot with just a few days left until the due date. But hopefully, as long-time readers of the ol' blog, you've already considered most of these.

If not, I hope you've got some new and helpful ideas on how to more easily file and perhaps reduce your tax bill.

And regardless of whether you'll still be working on your 1040 on Tuesday or filed months ago, be sure to reward yourself on April 17 by taking advantage of these Tax Day discounts and freebies.