Tax deadline looms
The countdown is on. Like seeing Santa in summer, the July 15 tax deadline is shocking — but real and soon! You didn’t prepare while locked down inside your house this spring so now the scramble starts. Here’s a plan of attack to get your taxes done in the next few days:
Getting organized
Start by making a big pile of all the tax information you can find on your desk or wherever you stashed it. Don’t stop to read it all; just put it in a pile. When you’ve done that, pull everything out of the mailing envelopes and divide it into two piles: income and expenses.
In the “income” pile put your W-2, 1099s (for interest, dividends, self-employment, IRA withdrawals) and any other income information. Remember, whoever paid you anything (except cash) is required to tell the IRS — and the IRS will be matching the forms automatically.
In the “expenses” pile put everything that might be deductible — real estate taxes, mortgage interest, business expenses documented charitable contributions, IRA contributions. You might not wind up itemizing these expenses since the standard deduction rises to $12,200 for 2019 and the deduction for state and local taxes is limited to $10,000 per return — making tax filing simpler.
Now you are ready for the second step.
The tax forms
You can always file your taxes yourself — FREE. But how much would you pay someone to do it for you in this last-minute rush? Remember, those storefront tax prep offices aren’t open this year for you to drop by. But online services like TurboTax offer a variety of programs that cost up to $200 and include individual advice from a CPA. You may find it’s worth paying this price for peace of mind. And at TurboTax you don’t pay until you’re ready to click to file.
If you earn under $69,000 a year you are eligible for the IRS Free File program offered by the major tax preparation services. Caveat: They may try to direct you into a more expensive program that could cost $100 or more based on your situation. Go to https://www.irs.gov/filing /free-file-do-your-federal-taxes-for-free to look up the programs that are truly free.
However you prepare your taxes, it’s expected that 90% of forms will be filed electronically this year. A check may be mailed separately or you can have the money automatically withdrawn from your bank account. And that brings us to the third step.
The money
Even if you don’t actually file your return you must pay all the tax owed by July 15.
You can file IRS Form 4868 for an extension but with it you are supposed to pay all taxes owed to avoid penalties and interest. At least pay as much as you can as a show of good faith effort. (That’s clearly an issue for many people who are now unemployed but had a good year in 2019.)
Since you’ve done all the work to figure out what you owe, why not just file your return on time?
A last-minute deduction
If you find yourself owing taxes, consider making a contribution to a tax-deductible IRA. Of course, that assumes you have some extra cash at this point. If you’re under 50, you can contribute $6,000 to a traditional IRA (or $7,000 if 50 or over) — with some income restrictions if you’re also covered by a company plan.
If you’re in the 30% tax bracket, onethird of your contribution is money that would have gone to the government. Fidelity says they’ve seen a 14% year-over-year increase in contribution dollars to IRAs as people take advantage of this last minute tax deduction.
There’s an old saying that nothing’s sure except death and taxes. In this year of the coronavirus, we’ve been trying to postpone both. But now your taxes are due. And that’s the Savage Truth.