Don't Mess With Taxes

We've yet to see autumn leaves here in Central Texas. It's still too hot and dry. But the arrival of October does bring another seasonal certainty: the Oct. 15 tax deadline.

October is here and I've got to say that although it's still early, the month so far is disappointing. Here in Central Texas, by now we're usually enjoying daytime temperatures in the 80s, with overnight lows dropping into the 60s.

That typically means our windows are open 24/7 to get full enjoyment of autumn weather.

Not in 2019. We're at least 10 degrees higher both days and nights.

One thing, however, that is certain every October is the mid-month tax deadline.

Oct. 15 is, of course, the day when procrastinators must finally send in their prior year's tax return. It's also the due date for some other important, though less wide-ranging, tax-related moves.

Here's a look at four tax tasks to take care of on or before Oct. 15.

1. File your extended tax return.
Millions of individual taxpayers decided back in April that they needed more time to finish filling out their 1040 forms. They filed for an extension, giving them six more months to finish that tax task.

Time is almost up.

If you're a taxpayer on extension, be careful. If you don't get to work on your 2018 return soon — now — in a couple of weeks you could end up in the same hectic tax situation you faced back in April. This time, though, there's no more time.

If you don't meet the ultimate Oct. 15 filing deadline, the IRS will start assess late- or non-filing penalties based on any tax that you didn't pay when you got your extension. If you didn't make a good estimate when you got your extension, that typically means a penalty of 5 percent on any underpayment for each month that the tax was due, but it could go as high as 25 percent.

The Weekly Tax Tips that have been running since April 15, as well as the more frequent Filing Season Tax Tips posted January through mid-April can help you finish this job. You can find links for the weekly and each month's tips under the tax tip pencil icon at the top of the right column.

Also remember that if you live in a state with an income tax, you probably need to file that official tax paperwork, too.

2. Fund your self-employment retirement accounts.
If you're self-employed, whether as your full-time job or as part of side hustles to your regular paycheck, you can stash added retirement savings based on these earnings.

And if you got an extension to file your annual tax return, you still have time to contribute to one of these accounts, such as an SEP-IRA or solo 401(k).

Heck, you still have time to set up a SEP account if you don't already have one and contribute to it for the prior tax year.

Putting money in a self-employer retirement account, even if it's not that much is a good idea for a couple of reasons.

First, retirement. Any amount you can save now will help when you finally decide to quit clocking in every day.

Second, it could help reduce your current tax bill.

Although the Tax Cuts and Jobs Act (TCJA) tinkered with the above-the-line deductions, the one for self-employment retirement savings is still there.

Plus, your retirement contributions, including to self-employment accounts, also count toward the Saver's Tax Credit if you qualify for this tax break.

Personal confession here: most years I get an extension to file my taxes mainly to give me more time to come up with my own self-employment retirement plan contribution amount. I much prefer putting those dollars in my future retired pockets than paying them to the U.S. Treasury.

3. Take money out of an over-funded IRA.
Yes, there is such a thing as putting away too much money into a retirement account, at least according to tax law.

If you put too much into a traditional or Roth IRA for the last tax year, the Oct. 15 due date also is the chance to withdraw that excess money in order to avoid an over-contribution penalty.

The IRS says an excess IRA contribution occurs if you:

1. Put more than the contribution limit into an IRA. For the 2018 tax year, that was $5,500 ($6,500 if you are age 50 or older).
2. Make a regular IRA contribution to a traditional IRA when you're 70½ or older.
3. Make an improper rollover contribution to an IRA.

If you don't take care of correcting the over-contribution amount plus its earnings, you could face a 6 percent penalty on the combined value of all your IRAs as of the end of the tax year.

However, the IRS offers a way out. You can withdraw the excess contributions and earnings from your IRA by the due date of your individual income tax return and that includes any extension period.

If you already filed your 2018 tax return without withdrawing an excess IRA contribution, you can still have the contribution returned to you within six months of the due date of your 2018 tax return. You'll need to file an amended return with "Filed pursuant to section 301.9100-2" written at the top of Form 1040X.

The IRS says in this case, report any related earnings on the amended return and include an explanation of the withdrawal. You can get more details on this IRA excess contribution correction process in IRS Publication 590-A.

4. Report your foreign bank account.
Global tax evasion continues to get a lot of attention, from tax agencies worldwide and, of course, the IRS. Uncle Sam wants you to let him know if you have any cash in a foreign account.

That foreign funds report is due each April 15, the same deadline as the regular tax-filing deadline. Also like the standard IRS forms due in mid-April, you can get an extension to file your foreign funds statement until Oct. 15.

Although this information is of interest to the IRS, you file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), electronically with the Financial Crimes Enforcement Network (FinCEN, hence the form's name).

Note that the FinCEN form is separate from IRS Form 8938, Statement of Specified Foreign Financial Assets. This form is required by the Foreign Account Tax Compliance Act, or FATCA, if you meet the foreign assets requirements and is filed with your annual tax return.

So, depending on your international money situation, you could be filing on Oct. 15 both Form 8938 and FinCEN 114.

More taxes for all of October: OK, three of these four October tax tasks are pretty specific, meaning that most of us won't have to worry about them. 

Still, it doesn't hurt to know about them since our tax situations tend to change. If the tax laws don't change (yeah, I know), they could one day apply to you. 

I know for many folks, finally filing that extended 2018 tax return is a major undertaking. If, however, you are able to wrap that and any other Oct. 15 tax duties up quickly, then check out some other October Tax Moves.

Those options are listed under the heading of the same name over in the ol' blog's right column. If your October weather is like mine, too hot so far to get out and enjoy, these tax moves are some constructive things you can do indoors, under air conditioning.

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