Tax Day is April 17th this year—two days later than usual. Here’s how you can keep your IRS nightmares to a minimum in the weeks ahead.
Except for, say, accountants and the wealthiest 1 percent of the country who will be making out like bandits with the Trump administration’s newly-implemented tax plan, Tax Day is kinda the pits. All those acronyms and forms can be really confusing and, at least in my imagination, the IRS is populated exclusively by unsmiling men who resemble Tommy Lee Jones’ character in Men In Black.
But Tax Day and the weeks leading up don’t have to be terrible. In fact, depending on your situation, tax season can actually mean you’re reclaiming some of the dough you shelled out during the year, which is very awesome. It’s also worth remembering that, while seeing your tax dollars very nearly wasted on a $31,000 dining room set for HUD Secretary Ben Carson is enough to send any taxpayer into an apoplectic fit, taxes are extremely necessary to fund things like education and roads, which are also very awesome.
In order to make the weeks leading up to April 17 as stress-free as possible, we asked some finance experts for insider insight on how to stay organized and maximize your potential to get money back.
Around the beginning of the year, the forms documenting how and where you worked should start rolling in. If you were a full-time employee, you’ll receive a W2 that documents your wages earned, as well as taxes that were withheld throughout the year. If you were a contractor or freelancer, you should receive a 1099 for any job where you earned $600 or more, though Toneisha Friday, founder and executive director of financial literacy platform Coin Financial, notes that even if youdon’treceive a 1099, you are still required to report any and all income you received. “Do your best to guesstimate,” she says.
You also may receive forms for your student loan payments, bank interest, retirement account contributions, mortgages, health insurance forms, and charitable donations. Friday suggests collecting all your documents in a single folder so nothing gets overlooked when it comes time to file.
Figure out how you’re going to file and who’s going to do the filing
Tax preparation services like H&R Block and TurboTax have made it increasingly simple to file your taxes online yourself or with one of their accountants, but before you open your wallet, personal finance expert and author of the New York Times best-selling book Get a Financial Life Beth Kobliner points out that you might be able to knock out your filing for free.
“If your adjusted gross income—which is the money you earned, minus deductions like retirement savings or student loan interest—was $66,000 or less in 2017, remember that you can file your federal (and potentially state) taxes for free,” she says, “and if you’re getting a refund this year, that basically means you’re getting paid to do taxes.” Kobliner recommends heading to irs.gov/freefile for a list of free filing sites.
Should your situation seem a little more complicated than the free filing services are equipped to handle, however, Kobliner says you should consider hiring an accountant—especially if you’re a freelancer and your situation requires some finesse.
“Remember, time is money. The time you spend poring through your 1099s, W2s, and receipts—and scouring IRS.gov trying to make sense of it all by yourself—could end up costing you more than two hours with a CPA would.”
Study up on what is going to save you $$
Another benefit of hiring an accountant or tax professional is that they’re going to be well-versed in all the write offs and deductions you may be able to take in order to maximize the amount of money you get back (or minimize the money you owe, if you underpaid throughout the year). But whether you enlist the help of a pro or not, Friday suggests taking advantage of the Retirement Savings Contributions Credit, also known as the “saver’s credit.”
“The longer you wait to start saving for retirement, the less time compound interest will have to work on your behalf,” she explains. “So to encourage people to stash away money in a retirement account, the IRS offers this tax credit. The amount of the credit is 50, 20, or 10 percent of your retirement contributions up to $2,000 (or $4,000 if you’re married and filing jointly). The amount you qualify for depends on your adjusted gross income.”
She adds that if you’re a freelancer or you’ve got a side hustle, you can write off certain expenses. “For example, if you purchased equipment or office supplies, these costs can be deducted on your tax return. Doing so reduces your taxable income, meaning you would owe less to the government.”
Keep it 100 with those tax collectors
While you definitely do notwant to blow your taxes off or get yourself into murky territory with the IRS, if you end up owing the government additional taxes or you fall a little behind schedule, they can actually be pretty chill.
“The IRS doesn’t mind if you need more time or you don’t have the funds to pay the entire tax bill right now,” Friday says, “but you must take the proper steps to alert them.” For those who can’t pay what they owe in one fell swoop, payment plans are an option and they’re generally accompanied by low interest rates. Those rates are determined on an individual basis with an IRS representative, so it’s in your best interest to be as forthcoming as possible.
“It’s just like any one of your relationships,” says Friday. “Communication is key!”