Today is Tax Day! TaxMama® wants to give you some last minute tips.
(Because of the Patriots’ Day holiday on April 15 in Maine and Massachusetts and the Emancipation Day holiday on April 16 in the District of Columbia, taxpayers who live in Maine or Massachusetts have until April 17, 2019 to file their returns.)
Today is a day of deadlines – important ones. So please pay attention!
- Your personal tax return is due – or get an extension – Form 4868.
- Your Corporate and Trust tax returns are due – or get an extension – Form 7004
- You need to pay your 2018 balance due – even if you get an extension (this avoids 5% per month penalties – up to 25% by Sept 15th).
- You need to FUND your IRA if you’re going to have one for 2018
- If you overfunded your IRA, Roth IRA, HSA, or any other deferred income account, today is the deadline to draw out those excess funds – to avoid the 6% penalty
- You need to make the 1st quarter 2019 estimated tax payments if you have a profitable business or investments
- This is the last day to file your 2015 tax return and still get your refund!
(Repeat all the same information for your state tax returns.)
Myth-busting – Filing an extension does not increase your audit risk. In fact, it reduces your audit risk because the extra time gives you the opportunity to gather all the missing information, make the correct calculations, and make the maximum possible retirement contributions to reduce your taxes to the lowest legal level.
If you owe the IRS a bunch of money and don’t have enough to pay the full balance due – pay as much as you can with the EXTENSION – but don’t file your tax return. You won’t face the late-filing penalty, and your late payment penalty will be the same as it would be if you had filed your tax return. The big difference? You buy yourself 6 months to raise the money without the IRS/State breathing down your back. How can you raise the money? Be creative:
- Have a special sale to generate the money.
- Borrow the money on a 0% credit card – (yes, you will have cash advance fees of 2%-5%, so shop around)
- Reduce your taxes by funding your retirement plan
- Save up money (or make online payments towards your 2018 balance).
Regarding the 2015 deadline. You only have three years to claim any refunds you have coming.
Right now, the IRS is sitting on over a BILLION DOLLARS of unclaimed refunds for 2015. If you haven’t filed that year’s tax return by today – the IRS gets to keep your money. By law, if you miss that deadline, they can’t give it you, regardless of your sob story – unless you can prove that you were deathly ill and totally incapacitated all that time.
So even if you don’t have ALL the information you need at hand – file your 2015 tax return to claim your refund. You have three more years, afterwards, to correct that tax return and give back any excess. (So keep the potential excess in the bank.)
You notice that there are a lot of things to pay today. If you cannot pay them all, here’s the order of importance:
- Fund the IRAs. You cannot put money in after April 15th and still get the 2018 deduction.
- Pay at least a little bit with your extension – but tell the IRS how much you really do expect to owe.
- Make your 1st quarter estimated tax payment for 2019. In case you end up needing an installment agreement for your 2018 balance due, you will only get it if the IRS sees that you have been paying the 2019 estimates – or have withholding.
So, get to work – right now!
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At https://iTaxMama.com/AskQuestion