Tax day is not far off. If you haven't done your taxes yet, it's time to bite the bullet and get down to business.
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If you've procrastinated, you're not alone. One in seven Americans file in the final week, according to FiveThirtyEight. They—and you—get a little extra time this year, just as in 2016 and 2017: taxes are considered on time if they are e-filed or post-marked by 11:59 p.m. on Tuesday, April 17 (not April 15).
Why do you get an extra two days? Because April 15 is a Sunday, and Washington D.C.'s Emancipation Day holiday falls on Monday, April 16. Since the deadline can't be a holiday or weekend, all of the country benefits.
Plus, some state tax filing deadlines are even longer. Iowa and Virginia residents get until May 1. The longest extension is Louisiana—citizens there don't have to file state taxes until May 15. If you live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming, you don't have to worry about state income tax at all.
Filing doesn't need to be a hassle. Today's tax-prep software painlessly takes you through the steps needed to file a clean, correct return in a timely fashion. The software saves your work as you go, so start now and finish when you have all the documents you need. By this time, you should have everything, though. Legally, most tax documents such as W-2s, 1099s, etc., should be mailed with a postmark by January 31, though there are a few exceptions.
Don't file until you're sure you've got all the forms in. Not only does it put a bigger target on you for an audit, it means more paperwork later when you have to file an amendment (Form 1040X; you've got three years from the original filing date to file an amendment to get a refund, and 1040X cannot be e-filed, only snail mailed). Better to file an extension (see below).
E-filing is the way to go. If you don't believe me, go read How to Get a Bigger Refund with Tax Software. Perhaps best of all, nine out of 10 e-filers receive refunds within 21 days, as opposed to six weeks for paper filers. Even the IRS prefers it.
However, back in 2015, there was a huge spike in refund theft—1.2 million fraudulent returns filed for $7.2 billion. The IRS and the states are desperate to crack down on tax refund fraud, and delaying refunds to verify IDs has become the norm, especially for those getting the Earned Income Tax Credit or Additional Child Tax Credit—because fraudsters love credits, since even a low-income return that owes nothing could get money back from those credits.
Because the IRS will only accept one return per Social Security number, filing early means beating fraudsters to the punch. Getting a rejection on an e-filed return is the first sign your ID may be compromised. Fixing that issue can be a true hassle, starting with it being your responsibility to do a fraud report.
All of which means, if it takes longer to get your refund, it may be for a good reason. The IRS fraud filters are more stringent, catching more legit filers in their claws. In 2015, 40 percent of the 4.8 million flagged by the IRS as fraudulent were not. Thankfully, by 2016 fraud was down by 46 percent, preventing $1 billion in bogus recompense.
This year, there's something else to worry about. The IRS issued a warning of a new scam: fraudsters making sure YOU get a tax return directly deposited to your account! Sound great, but then the bad guys try to trick you into handing the money over to them. It's a phishing+fraud+social engineering scheme for 2018. If you get an erroneous refund, contact your bank and have them return the refund to the IRS, then call the IRS at 800-829-1040 for individuals, or 800-829-4933 if it's for your business, and explain what happened. You can read a lot more about this in Forbes.
Oh, and if you do get a snail mail from the IRS, or especially an email, beware of wording like "You must update your IRS e-file immediately," because that could also be a phishing scam. Forward the emails to email@example.com, or call the numbers above.
Hopefully you're past worrying about all this because you've already filed. If you haven't, here's a quick overview of what you need to know.
Determine the Best Tax Software for You
The three big names in online tax preparation software remain Turbo Tax, H&R Block, and TaxACT, and all get high marks, but only TurboTax takes home the Editors' Choice in 2018.
All range in price from free versions for federal filing to premium packages, with paid products starting under $50. Each offers a variety of ways to claim refunds, provide recommendations to avoid an audit, and offer some form of an accuracy guarantee.
- Intuit TurboTax Deluxe 2018 provides an easy, straightforward platform with a variety of informative resources. The program weighs your risk for an audit and helps you find most basic deductions. This year, it's our only Editors' Choice for tax preparation software.
- TaxAct Online Plus 2018 is another good tax program and provides the best value. As a lower-priced option, TaxACT is often seen as inferior, when in fact it provides the same tools and learning materials needed to file taxes accurately. If you have simple returns, TaxACT is all you need.
- H&R Block Deluxe 2018 is another step-by-step program that's slightly more extensive, which could be a benefit to those with more complicated returns. It's the only one of its kind to offer physical locations for walk-in tax support, since H&R Block locations have existed since 1955. Use the Deluxe version if you don't need self-employment or investing tools.
Skip the Accountant When Running Late
If you aren't going to extend but don't want to file yourself, going to an accountant by this time is unlikely to help. Most accountants want you to get everything to them well before mid-March; they're all in the weeds during the month of April.
That could be a shame if you make less than $54,000 a year or have a disability—under the Volunteer Income Tax Assistance (VITA) program, such circumstances make you eligible for free in-person tax prep, typically through local community centers. The same is true for anyone over 60 via the Tax Counseling for the Elderly (TCE) program.
File Late for Refunds Only
If you know you're owed a federal refund, you are totally allowed to file late! In fact, the government would appreciate it. It prefers to collect money. Or keep it: If you wait long enough—three years—your refund becomes government property. So don't wait. (This doesn't apply to the states, however. File on time.)
There Are Penalties for Filing, Paying Late
If you don't file by April 17 (not even an extension), but you owe money, you could face monetary penalties of 5 percent of any unpaid taxes owed for each month you don't file, up to 25 percent of the total owed. On top of that, you have to deal with the IRS. That's just for filing late. Then there's a penalty for paying late—another 0.5 percent per month. And there's no statute of limitations on lateness—the IRS will come after what you owe even in 80 years, if you last that long. The moral is, file even if you can't pay what you owe. The penalty for not filing is a lot worse than the penalty for not paying.
Remember to Extend if Needed
You can always file an extension. It also must be filed by April 17, just like a standard tax return would without an extension—and you can do it with tax software. Doing so gives you an extra six months to do the paperwork, until October 15, 2017; for states it varies. The Form 4868 ("Application for Automatic Extension of Time to File U.S. Individual Income Tax Return") is part of your e-filing tax software. Here's how to file it in TurboTax.
Pay What You Can
If you owe money, getting an extension to file by October 15 doesn't mean you get to pay later. You are required to pony up at least 90 percent of what you owe by April 17. (Remember, that beats paying the 5 percent per month penalty you recieve if you don't even file an extension.)
Last-Minute Retirement Deductions
Until April 17, 2018, you can contribute to a traditional IRA and deduct the amount from your income. Contribute up to $5,500; if you're over 50, the limit is raised to $6,500. Additionally, you can still contribute to a SEP-IRA, and/or Health Savings Account for the 2018 calendar year.
Deduct for the Office
Did you drive a lot for work, buy meals while traveling for work, purchase items for your classroom, or equipment for your home office (like that fancy new computer)—all of which was not reimbursed by your full-time employer? Deduction time, Watson! If those costs are over 2 percent of your adjusted gross income, you're looking at a deduction you might otherwise have missed. Look for form 2106.
Add Up Your Medical Costs
If you pay directly for glasses or contacts, examinations at any doctor, teeth cleanings, hospital visits, ambulance bills, etc., in calendar year 2017—and those expenses all add up to 10 percent of your adjusted gross income (7.5 percent if you're over 65)—you've got a major deduction on your hands. It may feel like it takes a lot to get to 10 percent, but one year with someone having a serious illness can add up quickly. Save them all, so you have a way to get back at least a little what you've spent out of pocket.
Find Your Missing Info
Worried about a missing W-2 or 1099? Get a look at your full IRS transcript—that's a list of all the income and wages information that was reported about you over the year. Go to IRS.gov on a desktop and under "Tools" click "Get a Tax Transcript." You'll need to provide your Social Security number or Individual Tax Identification number (ITIN), date of birth, filing status, and street address. They now let you get the transcript online, suitable for printing. However, it's finicky—it wouldn't accept my mobile phone number, required for extra authentication, so I have to wait to get a snail-mailed activation code.
Know Your IP PIN (If Necessary!)
For a select group of citizens—mainly those who may have a compromised Social Security number—the IRS will assign a six-digit Identity Protection personal identification number (IP PIN). It's another extra-governmental identifier that might make privacy advocates apoplectic but helps the IRS in its constant battle against fraud.
Including it provides government accountants extra assurance you are you. If you ever got one, even as part of a pilot program, it's required for all future tax returns. If you can't find your IP PIN (it comes on a CP01A notice; you'll get a new one every year), go to the Get An Identity Protection PIN (IP PIN) page to retrieve it. If you've never received an IP PIN in your life...consider yourself lucky.
Don't Sweat the Audits
A lot of people get stressed about an audit, where the IRS comes in and goes over your records to make sure you're not a big ol' tax liar. Software like TurboTax will give you a rundown of why it thinks you're at risk of an audit, or not. There might be some random audits, but if you've never been audited before, it's unlikely to happen now if you don't have any red flags in your filing. Budget and staffing cuts mean even then, it's unlikely. (The IRS probably won't even be able to handle 40 percent of the calls to its tax-help line this year, let alone go after tax evaders.)
At least one accountant claims a good way to avoid audits is always to file for an extension and submit tax paperwork in the height of summer, because auditors like to vacation, too. But filers making over $1 million a year or living overseas are statistically more likely to get inspected, no matter what.
Beware the IRS Scam Calls
In 2015, scam calls from people/bots pretending to be the IRS demanding tax payments were on the rise, persisting into 2017. Most calls are spoofed to appear like they come from Washington D.C.'s 202 area code to give them an air of legitimacy, but they've come from Washington, New York, and Texas area codes, among others.
Even if the caller claiming to be from the IRS knows your name or other personal info, it is a scam: the IRS will never call you to demand an immediate payment, and certainly won't ask for a credit or debit card number over the phone. You'll always get something in the mail as IRS first contact. You always, always have the right to appeal before you pay a dime, even to the IRS. It's all part of the Tax Payer Bill of Rights.
If you get such a call, report it on the IRS Impersonation Scam Reporting page or call 800-366-4484. Smartphone users should download the Hiya app (Free; ) which has built-in phone spam detection specifically targeting these calls. If you report a call to Hiya, it adds any new numbers to the database to help others. The area code with the most robocaller numbers detected by Hiya: Washington DC, of course.
Find the Last Open Post Office
For the Luddites who fear electronic filing: There are a number of USPS offices open until midnight on April 17—and you must have an 11:59:59 p.m. post mark or you're late. Use the USPS.com Locations tool to find the office nearest to you that will be open, but call to make sure.