For some of you, it’s the second most wonderful time of the year, the time when you get your tax refund! For others, it’s the worst time of the year, the time when you strike a check to Uncle Sam. Whether you are the type who withholds a lot of money and will receive a fat check this season, or the type who didn’t withhold enough, April has arrived and for many of you, that means you may be doing your own taxes very soon if you haven’t done so.
Before you do your own taxes this year, you may want to know there is a little extra time to file. Not only does Tax Day fall on a Saturday, but Monday is also a holiday in Washington D.C! Thanks to Emancipation Day, instead of filing your taxes on Monday, April 17th, you have even more time to file.
Remember, the tax return should be filed before midnight on April 18th.
On Tuesday night, April 18th, you have no excuse to not have your taxes filed since you have an extra few days; but, still, let all the slackers rejoice at the extra time!
Here are five things to know before doing your own taxes this year.
1. Doing your own taxes
If you have complicated taxes, I would highly suggest not doing your own taxes. A great accountant can help you save more, and especially help you avoid the chances of an audit or penalty from the IRS.
If your taxes are not complicated and you decide to do your own taxes, I would highly suggest you use a program to guide you. I have personally been using TurboTax for a few years and they make it simple to do your own taxes online. One of my family members did have a problem with TurboTax and, instead, used Liberty Tax. They were happy with this and I have an affiliate link for you for 30% off! Here is the link: 30% OFF LIBERTY TAX
Using these online companies to do your own taxes can help you find deductions and or tax credits since they ask you questions about your income, and make suggestions based on your answers. If you are doing your own taxes, you may not be knowledgeable of deductions and/or tax credits and miss out on money, or pay more in taxes.
2. If you are not ready, file an extension
There are times when people just are not ready to file their taxes by the deadline. Sometimes when you are doing your own taxes, you may be missing an important tax document and you are unable to properly complete your tax return. If you are missing information, please, do not guess what is on those documents. You can EASILY file an extension for filing a tax return. Here is a link to the TurboTax extension page: TurboTax Extension
However, it’s extremely important you understand filing an extension does NOT mean you do NOT need to write a check to the IRS. You will need to estimate your taxes (be conservative, it’s better to overstate) then file an extension and write a check to the IRS. You will then have until October 16th to file your return. If you pay less than the amount you owe on your return, you will be penalized. It is always a good idea not to understate the amount of money you write the check for when filing an extension.
3. Health Insurance
Health insurance is all over the news lately, and you should not forget that it is mandated you currently own health insurance. There are a few exceptions. For example, if you are on Medicaid, Medicare, or fall into a gap between a certain percentage of the poverty line and Medicaid (you can see exemptions here: exemptions) you will likely not be penalized for not having coverage. For everyone else, if you do not have coverage, prepare to strike a check for $695 or more (penalty information found here)
This is another reason why you should use Liberty Tax if you do your own taxes; it will ask you questions about health insurance so you do not make any mistakes in your income tax form.
4. IRA Contributions
Did you forget to contribute to your IRA during 2016? Don’t worry if you are doing your own taxes, because you have until Tax Day to contribute to your IRA!
When you contribute to an IRA, you get to reduce your income by the amount of money contributed. This lowers the tax owed since you pay tax on a lower amount of income.
You are able to contribute $5,500 to your IRA for the year 2016 ($6,500 this year if you are older than 50). Just watch out if you also contributed to a Roth IRA or a 401k this year. If you did, you may not be able to contribute depending on how much you added. Here is an article showing how to calculate if you can still add to an IRA If you contributed to a 401k: Investopedia article.
Just as we stated above, since Tax Day is extended an extra few days this year, you have an extra few days to get that IRA contribution done! So don’t forget to log into your brokerage account, or get the checkbook out, and get your contribution to your IRA before the deadline.
5. HSA Contributions
An HSA (health savings account) is an account you can benefit from if you have a high deductible health plan. Just like IRA’s, you are able to contribute to your HSA plan for the year 2016 up until the tax deadline.
The HSA maximum contribution for the year 2016 was $3,350 as an individual, and $6,750 for a family (there is an extra $1,000 catch-up contribution if you are older than 55). Don’t forget if you are doing your own taxes that you can still add money to these accounts right now. Adding your HSA and your IRA contributions can reduce your income tax even further and you still have time to get money into those accounts.
Tax Day is getting closer, and if you are doing your own taxes, don’t forget these five important topics. If you do your own taxes, be sure to use a program like 30% Off Liberty Tax or TurboTax. If you are not ready, make sure you file an extension and write a check for your estimated taxes for 2016. Remember, you may have a penalty if you didn’t have health insurance in 2016, and you still have time to add money to your IRA and HSA accounts.
Even though you have a few extra days to file, try not to slack-off too much doing your own taxes this year!
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Disclaimer: I am not an accountant and this is not tax advice. This article contains affiliate links. Please see my disclaimer.