With the tax deadline just around the corner, the pressure is on for people who still haven’t filed their taxes. Financial advisor Brad Allen talks with Milwaukee’s WTMJ-4 about some last-minute tax tips to help procrastinators.
Save Time & Money – You can get your money quicker by e-filing and using direct deposit. Direct deposit is also a safer way to get your money, because your check isn’t sitting in your mailbox. You can use free-file on the IRS website if you file a qualifying return. Or you can e-file with one of several different tax filing companies. Depending on your annual salary, some of these sites will allow you to file your state and federal taxes for free, but most people will have to pay some sort of fee. Make sure to double check, because these errors can cost you money in your tax refund or flag you for an audit.
Avoid Penalties – Basically, there are two penalties the IRS charges fees for: a late filing fee and a late payment fee. If you can’t get all of your paperwork together by the deadline, an extension will give you an extra 6 months to file. Don’t forget, even if you file for an extension you can still get hit with a late payment fee if you owe money on your taxes. Make your best estimate because you still need to pay by April 17th. Then, make sure you get your return filed by October 15th. Learn more at IRS.gov
Lower Your Taxes – One way to lower your tax bill is by increasing your retirement savings. The money you contribute to a 401(k) or IRA is not included in your taxable income. That means your taxes will be reduced, even if you take the standard deduction. You can contribute money to your retirement accounts until April 17th for your 2017 taxes. Younger workers are capped at saving $5,500 in their IRAs for 2017. However, workers 50 and older can put $6,500 into an IRA.
Plan for Next Year – Make sure you are withholding the right amount out of your paycheck. A lot of people are withholding too much and getting a big refund each year. But that’s your money the government is holding interest free year-round. If you withhold too little, you’ll owe at tax time. Ideally, you want to have just enough withheld so that the amount will come as close as possible to your actual tax liability for the year. You can make changes at any time by filling out a W-4 with your employer. The IRS released a calculator to help you determine your withholding.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Drake & Associates does not offer tax or legal advice.