April should be a month that we all welcome with open arms. It’s spring, the birds are chirping, we can break out our leather jackets… but then there’s taxes. Those of you who were expecting money back likely have already completed your tax return and eagerly check the mailbox daily for your check. For the rest of us poor souls, here are 5 last minute tax tips that could save you a little cash and make tax season a little less painful.
1. Did you contribute to your retirement fund?
If you’re not putting money away for retirement, you have no one to blame but yourself when you can’t afford nice quality dentures for the retirement home dance. Really though, if you’re any older than 25, you need to start taking your retirement fun more seriously. You have until April 15, 2014 to contribute to a traditional IRA, deductible or not, and to a Roth IRA. That includes IRAs, Roth IRAs and SEP IRAs. These funds grow tax-free and can be generally be pulled out anytime after you turn 59 ½.
2. Do you work at home?
New this year: a simplified option for home office deduction which allows you to deduct $5 per square foot of the space you use for your business. You can write off up to 300 square feet (a maximum of $1500). But keep in mind, the traditional method, taking a percentage of actual expenses may still often yield a higher deduction.
3. Did you make a capital purchase for your business?
This includes items like a new computer, a desk, or other work related equipment. If you bought something like this, you can make an accelerated deduction (meaning you can deduct up to the full amount for 2013 versus taking depreciation deductions over a period of time).
4. Plan on filing for an extension?
If you can’t finish your return on time, make sure you file Form 4868 by April 15, 2014. This form gives you a six-month extension of the filing deadline until October 15, 2014. You’ll just need to make a reasonable estimate of what you owe for 2013 and pay any balance due with your request.
Requesting an extension in a timely manner is especially important if you end up owing tax to the IRS. If you file and pay late, the IRS can slap you with a late-filing penalty of 4.5 percent per month of the tax owed and a late-payment penalty of 0.5 percent a month of the tax due. The maximum late filing penalty is 22.5 percent and the late-payment penalty tops out at 25 percent. By filing Form 4868, you stop the clock running on the costly late-filing penalty.
7. File electronically
Electronic filing works best if you expect a tax refund because the IRS processes electronic returns faster than paper ones, and you can expect to get your refund three to six weeks earlier. If you have your refund deposited directly into your bank account or IRA, the waiting time is even less. Taxes that are e-filed also have less than 1% of errors, compared to 20% of paper returns. You will also get a confirmation that your filing was received, which protects you from interest and penalties that can happen if a paper return is lost.
If you owe money, you can file electronically and then wait until the federal tax filing deadline to send in a check along with Form 1040-V. You may be able to pay with a credit card or through a direct debit.
- With a credit card, expect to pay a service charge of as much as 2.5 percent.
- With direct debit, you may delay the debiting of your bank account until the actual filing deadline.
If you haven’t even thought about taxes yet, let this serve as a reminder. Make sure you have a professional handling your taxes to ensure you are getting the most money back. It may be tempting to have your cousin, Jose fill it out for you, but this is one place you shouldn’t be cheap. Goodluck!!