AURORA | WebMD aside, procrastination is a serious affliction. And come this time of year, the dilatory action can be one that hurts in a particularly painful area:
the wallet.
Between sorting through the myriad quadruple-digit forms, the weeks before April 15 are typically fraught with anxiety for many fans of the 11th hour. However, they don’t have to be, according to Herb White, a Denver-based certified financial planner.
“Many people miss out on opportunities to maximize their deductions and minimize their liabilities,” White said in a statement. “Tax time doesn’t need to be nerve-wracking.”
So, for the some 150 million Americans that have yet to pay up, here are White’s five quick tips to mull over heading into the 2015 deadline.
1. File and file yesterday
April 15 is April 15, there’s no getting around it. Tax return extensions are an option, but that just extends the filing deadline, not the payment deadline. Any outstanding payments snuffed out after April 15 can be subject to hefty penalties and interest rates, which are continuously assessed until the balance is paid.
2. Fatten your stack of forms before diving in
On top of the necessary W-2, many filers also need at least one of the various types of 1099 forms to file even the most basic of returns. The gamut of 1099’s runs from reporting numbers related to self-employed income and accepted distributions from IRA’s or Social Security, to earned interest on investments, as well as gains and losses from the sale of a property.
3. Max out that IRA
If you didn’t max out that IRA or Roth IRA last year, you’ve still got a few precious moments to do so. The maximum individual contribution is $5,500 with the option for an extra $1,000 if you are over 50 years old. And a bonus tip: The current lack of an income limit for converting a traditional IRA to a Roth may be ending in coming years, making the conversion a prudent decision now as opposed to any time in the near future. A Roth conversion allows taxpayers the chance to pay using today’s rates for tax-free income in the future.
4. Claim past investment losses
Tax-loss harvesting is not quite as mind-numbing as it sounds. If you had any large gain or loss in investment value in 2014, harvesting takes the net of your profits and losses to create up to a $3,000 capital loss deduction to help offset other taxable income. Essentially, it works to balance out loss and allows you to keep rolling capital loss over year after year until it has been fully claimed.
5. Maximize your deductions
One of the most commonly claimed deductions is that for the interest paid on a mortgage and/or student loans — so claim it with a 1098 form. And of course, don’t forget those charitable contributions, which can range from things as trivial as a donation to Goodwill to the gift of an older vehicle — just remember to save your receipts.
Some lesser-known deductions include:
•Qualified charitable distributions from IRAs by those at least 70.5 years old;
•Medicare premiums for the self-employed;
•An above-the-line deduction for higher education tuition and fees;
•Optional deduction of state and local sales tax instead of state and local incomes taxes (this was retroactively reinstated for 2014);
•Penalty waiver for the newly retired (applies for ages 62 and older).