Haven’t filed your tax returns yet? Don’t worry, there’s still time. Many millions of Americans have not filed their tax returns and habitually do not do so until the eleventh hour. If you’ve been procrastinating till now, it’s time to do something and at least begin the tax filing process. Here’s what you can do:
Apply for extension
If you feel your taxes will require more time for you to compile the necessary documents and calculate the correct figures, you should apply for a six-month extension to file. This is an automatically-approved extension allowed to file your returns not an approval to delay paying. You must still pay your taxes (or an estimate of it) by April 15th but you can submit your tax return forms later. To apply for extension, fill out IRS Form 4868. This form must be submitted to the IRS by April 15th.
Lower your taxes
It’s still not too late to lower your taxes by contributing to a traditional Individual Retirement Account (IRA) or a qualified Health Savings Account (HSA). These contributions are tax-deductible. For tax year 2014, you may be eligible to contribute up to $5,500 to a traditional IRA as long as you’re below 70½ years old and have earned income. In addition, if you’re aged 50 and above, you may be able to make an extra “catch-up” contribution of $1,000.
You would be eligible to contribute to a traditional IRA if neither you nor your spouse is covered by an employer retirement plan. But if you or your spouse is covered by such a plan, eligibility to deduct contributions phases out at higher modified adjusted gross income limits. For existing qualified HSAs, you can contribute up to $3,300 for individual coverage or $6,550 for family coverage.
Do not get fooled by tax scams
Especially if you’re submitting your tax returns at the last minute, it is possible to get conned by criminals who try to scam you into divulging your Social Security number, bank account number or other personal details. These scammers are trying to steal your tax refund or get you to give them money in exchange for some promised service or to avoid a so-called hefty fine by the IRS.
Remember, if anyone calls you saying they are IRS agents, it’s very likely a scam. The IRS never initiates contact with you by phone. Likewise if you receive an email purportedly from the IRS, it’s highly suspicious, too for the same reason. Report such incidences to the IRS and the police. The important thing is to never disclose your Social Security number and personal financial details over the phone or online.
Do not waste your refunds
It’s tempting to use up your tax refund in impulse buying or shopping. But there are better ways to use your tax refunds. One practical thing to do would be to use it to pay off your existing debts. Always pay off debts that carry the highest interest first, even if you can only partially pay towards the whole amount. Credit card debt is usually one of the debts with the highest interest rates.
Another thing to do with your tax refunds is to deposit it into a retirement fund such as an IRA or education savings plan. And finally, you can simply save your tax refund for a rainy day.