Everything You Need To Know For Tax Day
Tax Day is quickly approaching, but there’s no need to worry if you haven’t filed yet. It’s a relatively easy process, especially when you have all of your information and documents readily accessible. Review the following important points to know for Tax Day so you can make the deadline before it’s too late.
We’ll discuss the following:
- This Year’s Deadline
- Taxable Vs. Non-Taxable Income
- Who Counts As A Dependent
- Determining Tax Deductions And Credits
- Tax Penalties For Being Without Health Insurance
- What Happens If You File Your Taxes Late
- How To Get A Tax Filing Extension
- How To File A Tax Amendment
- Consequences For Not Filing Taxes
- How To Arrange A Payment Plan For Taxes Owed
- How To File Your Taxes Quickly
The Deadline This Year Is April 17
Although it’s not recommended to wait until the last minute, you do get two extra days this year to file your taxes. Tax Day is normally held on April 15, but that date falls on a Sunday this year. Tax deadlines are always extended to Monday if April 15 falls on the weekend or a federal holiday. However, Monday, April 16 is Emancipation Day, honoring the1862 Compensated Emancipation Act ending slavery. Thus, taxes are not due until Tuesday, April 17.
Taxable vs. Non-Taxable Income
Taxable income includes W-2s, 1099s, rental properties, bonuses, alimony, and unemployment benefits. Child support, cash gifts, insurance payouts, and welfare benefits are considered non-taxable. Consult a professional if you are unsure about what counts as income.
Who Counts as a Dependent
The term “qualifying dependent” applies to any children (biological, adopted, or fostered), spouse/partner, parent or non-relative that relies upon you for support. Only one tax filer or Head of Household can claim a dependent.
Criteria for dependents include U.S. citizenship/nationality, living with you all year, earning less than $4,050 in that year, or being related to you through marriage or blood. Non-custodial parents must receive approval from the primary caretaker in order to claim a child.
Even though many people consider their pets “children,” the law does not recognize animals as dependents.
Determining Tax Deductions and Credits
For starters, ignore all recent tax law changes under President Trump’s first year in office as they will not take effect until the 2018 filing season (in other words, for Tax Day 2019). Review all of the possible deductions and credits to see if you can reduce owed taxes or increase your refund. (Check out 10 Tax Deductions You Don’t Want To Forget.)
This year’s personal exemption is $4,050 per person unless you are already claimed as a dependent by someone else. Standard deductions are $6,300 for single filers or married filing separately, $12,600 married filing jointly, or as a qualifying widow(er), and $9,350 as Head of Household.
Along with the Additional Child Tax Credit (ACTC) and Earned Income Tax Credit (EITC), there are breaks/itemized deductions for buying and owning a home, loans, medical expenses, charitable donations, retirement savings and college tuition expenses. Spouses filing separately need to check with each other about deductions since certain credits are only applicable at one per person.
Tax Penalties for Being Without Health Insurance
Under the Affordable Care Act, you and your dependents must have health insurance for the entire tax year. Otherwise, you will be penalized the Individual Shared Responsibility Payment, either as a flat fee or as a percentage of household income, whichever amount is greater.
The 2017 flat fees are $347.50 per child under the age of 18 and $695 per adult, not to exceed $2,085. The percentage of household income is assessed by subtracting the minimum filing requirement from your total income, and then calculating 2.5 percent of that remainder. (You can then divide the yearly total by months you were uninsured if coverage was partial).
Although you only have to check off “yes” to the question of health coverage and not submit proof, make sure that you actually have the verification. If you do not receive your 1095-A, B or C form, contact the issuing agency.
What Happens if You File Your Taxes Late
If you know you will owe money, it may be better to file by April 17 with the information you have and amend your return at a later date. There are no late fees for filing taxes that result in refunds, so you don’t need an extension if you’ll be getting money back. Consult your local laws for filing a state extension since it may differ from the federal requirements.
How to Get a Tax Filing Extension
If for whatever reason, you don’t have all of your documents for filing, request an extension using Form 4868, Application for Automatic Extension of Time, as soon as possible. The deadline for requests is the same as the filing itself, April 17.
The extension will give you until October 15, 2018 to submit your tax return. An extension only applies to the filing, however, which means that any money owed is still considered due as if you were filing April 17. Additionally, penalties for late payments will continue to accrue if you wait until October to submit payment.
How to File a Tax Amendment
Upon reviewing your 2017 return, the IRS will correct simple addition or subtraction errors and contact you if there is incomplete information. However, you may have to file Form 1040X, Amended Individual Income Tax Return, if you have Roth IRA conversions or need to correct deductions. You have two years from the date that you paid taxes or three years from the filing date to adjust accordingly.
Consequences for Not Filing Taxes
Financial penalties accumulate quickly if you do not file taxes in which you owe money. Without an extension, there is a five percent charge on your balance for every month you do not pay. This caps at 25 percent of what you owe if paid within 60 days of your filing date. After 60 days have passed, the penalty becomes $205 or 100 percent of owed taxes, whichever is a smaller fee.
Avoiding taxes and/or filing misleading information may result in civil and criminal charges. You can also face imprisonment for intentionally evading taxes.
How to Arrange a Payment Plan for Taxes Owed
Before you panic about paying taxes, check into payment plan options to ease financial burdens. Late payments accrue 0.5 percent balance assessments per month, with a maximum of 25 percent additional due.
If you’re confident you can pay off the balance within 120 days of when it’s due, try applying for a Short-Term Extension found at the IRS website under “Online Payment Agreement.” Should you need more than 120 days, consider the terms of Form 9465, Installment Agreement Request. There is a $120 fee for this agreement; however, it is reduced to $52 if you make payments through direct debit and never miss a bill.
Alternatively, compare credit card interests to IRS penalties and see which is a cheaper way to pay. If that’s still not feasible, enquire about Form 656, Offer in Compromise, which includes a $186 fee and seeks to reduce the total amount of taxes owed.
How to File Your Taxes Quickly
E-filing is quicker than paper and can be done through the IRS Free File site. There are also several software programs and accounting/tax company websites that offer their electronic services (check out Easiest Ways To File Your Taxes.) To prevent delays due to questions or concerns, consult with a tax representative by phone or in person.
Returns typically take up to 21 days depending upon whether you filed by paper or electronically and whether you are expecting a check or direct deposit. You can track your return’s status with the “Where’s My Refund” online/mobile app. Note that the app does not apply to amended returns or previous filing years.
Now that you are armed with this knowledge, you can stop worrying about Tax Day and get your information submitted on time to avoid any penalties. Hopefully, you’ll get a quick refund! (See 5 Smart Ways To Spend Your Tax Refund.)