The following guest post from top selling
author, attorney, tax and small business expert, Barbara Weltman is extremely
timely for people like myself who put off taxes until the last minute. Here
Barbara shares her best last minute tips for tax day.
In today’s economic environment, every
financial milestone is an important one. It’s critical that small business
owners have the right tools and know-how to properly manage their taxes
year-round so they’re not dealing with undue stress on the days leading up to
April 15th. The right solutions can help small business owners efficiently and
easily manage their business’s finances and employee tax withholdings, so they
can spend more time running their business. With the April 15th deadline
looming, here are some things you can still do to reduce your tax bill and make
the filing process a little easier.
5 Very Last Minute Tax Tips
1. Contribute to a deductible IRA or HSA.
Yes, even though 2019 is over, you can put money into an IRA or health savings
account (HSA) for the 2019 year (assuming you’re eligible for these accounts)
and deduct the contributions on your 2019 return. You must act by April 15th.
IRA contribution limits for 2008: $5,000, or $6,000 for those 50 or older on
December 31, 2008. HSA contribution limits for 2008 depend on whether you have
self-only coverage under a high-deductible health plan, or family coverage;
those 55 or older on December 31, 2019, can add another $900.
2. Double check for carryovers. You may
have forgotten tax breaks from your 2007 tax return that can be used to cut
your 2008 tax bill. Look for capital loss carryovers (reported on last year’s
Schedule D of Form 1040), which can be used to offset any capital gains in 2008
if you had them, plus up to $3,000 of ordinary income. Other carryover
possibilities: home office deductions, charitable contributions, and net
operating losses.
3. Settle up your tax bill. If you owe a
small amount, pay it by check or charge it to a major credit card. While the
IRS doesn’t charge a fee for paying by credit card, there’s a 2.49{1e9610a02c0f2f33a49776a6f3a4cdb5337e34789fd8a9ca89ecccf97f2bcf28} convenience
fee imposed by the credit card processor, so if you charge $1,000 in taxes,
you’ll pay $24.90 to the processor—a hefty cost for racking up frequent flyer
miles. Larger bill? If you can’t pay in full, ask the IRS for an instalment
agreement by filing Form 9564 This usually allows you to pay what you owe, plus
interest, over the next three years.
4. File electronically. If you wait until
the last minute, avoid lines at the Post Office, as well as save paper and
postage, by using e-File to submit your return. Electronic filing also ensures
that your return is free from math errors and has all the required information
(e.g., Social Security numbers) for processing; you’ll receive an electronic
acknowledgment from the IRS that the return has been accepted for filing. You
may even be eligible to use FreeFile to prepare your return online and file it
electronically at no cost, and if not, use this time
saving Excel guide. Bonus: If you’re owed a tax refund, you’ll
get it sooner by filing electronically than you would if you send in a paper
return.
5. Put your refund to work. If you’re owed
money, use it to create future tax savings. You can have the IRS deposit your
refund directly into an IRA, an HSA, or a Coverdell education savings account.
Provide the account information (account number and routing number). Make sure
the account custodian credits your refund to the correct tax year (e.g., your
2008 is applied toward your 2009 IRA contribution). You can even split your
refund into two or more accounts (file Form 8888 to provide all account
information.)
Caution: If you had a large refund,
recognize that it amounts to an interest-free loan you made to Uncle Sam. To
avoid this next year, reduce quarterly estimated tax payments related to your
business income to better equal your actual tax bill for the year. Under a new
rule for small business owners (more than half your income is derived from a
small business and your 2008 adjusted gross income was under $500,000), you
won’t be penalized for underpaying estimated taxes and you’ll improve your cash
flow by pegging 2019 estimated tax payments (plus any tax withholding) at 90{1e9610a02c0f2f33a49776a6f3a4cdb5337e34789fd8a9ca89ecccf97f2bcf28}
or more of last year’s tax bill.
Final word. If, for any reason, you don’t
want to think about taxes now, be sure to obtain an automatic six-month filing
extension. File Form 4868 no later than April 15 to avoid late filing
penalties. Also, if you expect to owe money, pay as much of it as you can now
to minimize or avoid interest and penalties for late tax payments.
