Ah, March. The days get longer. The weather gets warmer. And we've got about six weeks before our tax returns are due.
I know it feels like these 31 days of March is plenty of time to take care of all the tax tasks still on your to-do list this filing season. But it's easy to get distracted by the charms of early spring.
To keep you at least partially on tax track, here are six March tax moves you can make. Most are easy, so you can soon be back to less taxing activities.
1. Contribute to your 2019 IRA.
Even if you have a workplace retirement plan, likely a 401(k) to which you contribute part of each paycheck, you can stash more money in another retirement vehicle, such as an IRA. You have the option to pick a traditional IRA or a Roth. Once nice thing about either of these IRAs is you have until the current year's filing deadline (April 15) to put money into the IRA for the previous tax year. If you haven't maxed out for 2019 — that's $6,000 if you're younger than 50 or $7,000 if you've hit the 50 mark or older — do so now. Plus, there's a potential tax bonus: You might be able to claim your 2019 contribution as an above-the-line tax deduction on the return you're about to file.
2. Adjust your withholding.
If you've done your taxes or a good draft and find you're getting a big refund or owe a lot, look into adjusting your withholding. The ideal payroll withholding situation, is to have just enough tax — not too much, not too little — taken out of your paychecks to meet your eventual annual tax bill.
I know, a lot of folks like the forced savings of overwithholding. But if you get that money every pay period throughout the year, you can use it to pay down your monthly bills, reducing some of the interest you're probably paying on revolving credit balances. Adjusting your withholding is easy, especially since the Internal Revenue Service revised its online Tax Withholding Estimator to better mesh with the new tax law. Use it to come up with the correct numbers to enter on the new W-4 form you'll give your payroll office.
3. Evaluate your estimated taxes.
If you work for yourself, either full-time or by taking on a few (or more) gigs to supplement your wages, you'll need to make estimated tax payments. These include not only the income tax you owe on your side hustles, but also self-employment (SE) tax. SE tax is the independent contractor's equivalent of payroll taxes.
Estimated tax payments are made four times a year: April (along with your annual filing for the prior tax year), June, September and then January of the next year. The IRS prefers you make four equal payments. However, if your freelance earnings fluctuate during the year, you can pay the appropriate amount for the money made mostly in one or two quarters. Either way, pay estimated taxes or you'll end up owing a penalty for late- or non-payment.
4. Find a day camp for your kids.
Yeah, it's not even officially spring, but working parents know that they're going to need child care for their youngsters when school's out for the summer. Finding a day camp that meets your kids' interests and your care and security requirements takes some time. Also, the best ones fill up quickly.
Day camps are good beyond occupying your youngsters while you and your spouse are at work. You can use at least part of the camp's cost to claim the child and dependent care credit. Even better, since it's a tax credit, it reduces your tax bill dollar-for-dollar once you've calculated ow much you owe. Depending on your income, the number of dependent children at the camp and the camp's costs, the credit could provide a tax break of up to $2,100.
5. Make vacation plans.
Again, as with your kiddos' camp, it's a good idea to start making summer vacation plans sooner rather than later. When you know when and for how long you'll be gone, then you can look into putting your place on the market, temporarily. Yep, I'm talking about renting your home to vacationers who want to visit your neck of the woods.
Plus, this sort-of swap could potentially provide you some tax-free rent, maybe even enough to pay for your vacation. As long as you rent out your residence for 14 days or fewer during the year, you won't owe any tax on the income. Be careful. Timing truly is everything here. When you're a temporary landlord for more than two weeks, you have tax and other issues to worry about.
These March pieces of tax advice are, as usual, listed under the countdown clock that's keeping track of how long until we reach this year's April 15 filing deadline.
If, however, you're a tax lamb, too timid right now to take care of your taxes, here's a bonus 6th March move: Hire a tax pro to help you meet your filing responsibility.
Regardless of which tax animal persona best fits you and your tax situation, take full advantage of the time this March to take care of your tax needs.