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Tax Tips to Guide Your Last-Minute Decisions

The deadline to file your individual tax return (with no extension, of course) is approaching quickly, so make sure you’re prepared to file and avoid costly penalties.

According to the Wall Street Journal, about one-third of taxpayers wait until the last two weeks to file with the IRS.

If you’re part of this group and scrambling to file in time, good news: due to holidays this year, the deadline moved to April 18 for most taxpayers and April 19 for Massachusetts and Maine residents. If you live abroad or in certain disaster areas, you’ll receive even more time to file.

Still, many people face the last-minute rush to file. Follow these tax accounting tips to guide your deadline-driven schedule:

  • Use Form 1095 to Determine Tax Credit or What You Owe. This year, most Americans received the new tax record Form 1095-A, 1095-B or 1095-C. The forms provided 2015 health coverage details, such as the number of months taxpayers and their families bought health insurance, if covered for less than a full year.

Use this data to help determine whether you qualify for a health-care tax credit or owe a payment for not buying coverage. If you lacked qualified coverage for more than three months in 2015, the penalty tax may be significant.

An IRS spokesman says taxpayers shouldn’t submit Form 1095 with their returns, but should save it with their records. Medicare enrollees won’t receive a Form 1095.

  • Reduce your 2015 Taxes through Remaining Opportunities. You can still receive a 2015 deduction by opening or funding IRAs with contributions up to $5,500 ($6,500 for people 50 and older) until April 18. Roth IRA contributions aren’t deductible but can provide future tax benefits.

Also, if you opened your Health Savings Account before the end of 2015, you can deduct its allowable contributions by April 18.

  • If You Can’t Meet the Deadline, File for an Extension. Still waiting for records or resolving other life issues? If you submit Form 4868 by April 18, you receive another six months to file taxes (October 15). File on paper or digitally through the IRS website or a tax-prep service. You can e-file through the IRS for free.

Remember: An extension for filing doesn’t equal an extension to pay tax owed. Taxpayers must pay 90% of their 2015 taxes by April 18 to avoid penalties. IRS Publication 505 provides more details.

  • If you can’t pay taxes owed, don’t just hope the problem disappears. Interest and several penalties build up quickly and constantly until you file. If you can’t pay all the tax due, the IRS recommends filing on time and paying what you can.

Consider requesting a payment plan by filing IRS Form 9465. According to an IRS spokesperson, approval of a payment plan is almost guaranteed if you owe less than $50,000 and can repay it in six years or less.

File the form online even before filing your tax return; you’ll likely receive approval in minutes. You’ll still face some penalties with interest (about 4% for tax due from April 1-June 30), but they’ll be far less substantial.

  • Protect your identity. IRS-related identity theft remains a growing problem for our nation and we’ve seen a dramatic increase among our clients. Follow the typical safeguards on your financial information, and ensure you’re on a secure connection while filing online.

If you’re a past victim, use your IP PIN to assist with the processing of subsequent eFiled tax returns. Be sure to respond promptly to every incident related to your filing.

Need help deciding how to approach the upcoming deadline or with other tax accounting issues? Contact the experienced Patrick & Robinson CPAs team for guidance: Office@CPAsite.com or (904) 396-5400.

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