If you’re one of the individuals who requested an extension to file taxes, there are a little less than 3 weeks to complete the process. I suggest to get started organizing all documents mainly because you will be reporting on earning and expenditures that happened over 10 months ago and it may take some time to consider the best way to present this information. This time period that has elapsed makes the whole process more difficult and some individuals tend to rush and complete filing taxes without proper verification of data. This may lead to mistakes and not optimizing all your tax benefits.
Many taxpayers face different challenges when paying taxes this time of the year, but there are certain situations that should affect nearly everyone. Below are some of those scenarios that most will face.
My first and most important advice would be not to procrastinate until the very end. The more time passes since April 18 deadline the more difficult it is to get all the documents in order. Even more important is the fact that at times it is simply difficult to file your taxes in one session. What I mean by that is that filing tax returns is a time consuming process, especially if you want to get it done right. Naturally you may outsource that function to a tax professional but you may be part of growing number of individuals who prepare tax returns on their own. Whether you use TurboTax, H&R Block or some other tax software it may take some time to explore and evaluate the best options, such as standard deduction vs. itemized. That’s why I suggest dedicating at least 2 or 3 days to getting taxes filed on your own. Not only it allows you to proceed without rush, but also better understand different portions of the tax forms you’re completing.
If it turns out that you owe money to Uncle Sam try to pay it off all at once or set up some payment system. Ignoring the issue will cost you 5% in failure to file and this amount can add up quickly depending on how much you owe. The government is quite flexible with taxpayers coming forward and presenting solutions to settle their obligations.
Electronic filing has become more prevalent and convenient method of filing taxes. Not only platforms such as TurboTax or H&R Block use it but tax professionals efile as well. One big advantage – speed of filing and almost immediate confirmation whether or not your tax form was accepted. And if you happen to expect the refund, choosing direct deposit will significantly cut the time to have the money in your bank account.
And last but not least, do not forget to report any advances you may have received to pay for the health insurance purchased through the Marketplace. Reporting on how you get and insurance, and if you get it at all, is now a necessity. If you’re filing taxes on your own, the software will cover health insurance portion and walk you through to report it. You should have received the same amount of financial assistance throughout the year (unless you reported some significant changes that may have affected your rates) that will help complete Form 1095-A.