For many, the oncoming tax season can be stressful, overwhelming, and even confusing, especially as the April 18th deadline draws nearer.
From deductions to exemptions, there are many items to consider when filing a 2015 return, leaving plenty of room for errors and costly mistakes. That is why proper organization and proactive planning are necessary in order to have a successful and stress-free tax season.
In an effort to help get folks prepared, Andrew Rafal of Scottsdale-based financial advisory firm Bayntree Wealth Advisors is offering six tips just in time for filing 2015 tax returns.
- File by the April 18 deadline. That’s right, you have a few extra days this year compared to the typical April 15th deadline. You can submit an extension for your return, but remember that this just extends your deadline to file, not your deadline to pay. You still need to make any payments by the April 18th deadline or you could be subject to penalties and interest. If you do file an extension and owe, there are fees assessed until the balance is paid.
- Have tax documents ready to go. You’ll need a few different documents before you file, including your W-2 from your employer. There are various types of 1099 forms that report income, payments and transactions that you will need to bring as well, which may include earned income while self-employed, distributions from an IRA or Social Security, earned interest or dividends from investments or had capital gains or losses from the sale of property, to name a few.
- Avoid Penalties Under the New Affordable Care Act Laws. New this year, all tax filers must provide either proof of health insurance coverage during 2015 or a certificate of exemption. Failure to meet these criteria with a gap in coverage for three months or more will result in a monetary penalty prorated based on the number of months without coverage during the year. If you purchased health insurance through the ACA marketplace, you should have received a 1095-A form from the IRS. If your insurance coverage is through another source, such as an employer-provided plan or Medicare, you should receive a 1095-B or C form. These forms may be used to provide information on your coverage during 2015 to assist in preparing your income tax return. However, you will not need to attach or submit these when filing the return.
- Max out your IRA contributions. If you didn’t contribute to your IRA or Roth IRA in 2015, or if you didn’t contribute the maximum, it’s not too late. You have until April 18. The maximum contribution is $5,500 per individual, with an extra $1,000 “catch-up provision” if you are 50 or older.
- Claim investment losses from previous years. If you experienced a significant loss in the value of your investments or other capital assets in 2015 or previous years, you may be able to take advantage of a strategy known as tax-loss harvesting. To offset capital gains or other taxable income you can roll over excess losses of up to $3,000 per year, year after year until that loss is completely claimed. Certain IRS regulations and income thresholds will apply.