Tax season opens tomorrow on January 23, 2017. With the burden of this season around the corner, more than 153 million individual tax returns are expected to be filed this year. I’d like to take a look at some the changes you should anticipate and provide a few tips which may help you avoid mistakes, meet the deadline, and increase your refund.
Change 1: New date
Taxes are usually due on April 15, but this year, that falls on a Saturday. On Monday, April 17, Emancipation Day will be observed in D.C., so in fact, the deadline has been extended until April 18.
Change 2: Delayed refunds
A new law, the Protecting Americans from Tax Hikes Act (PATH) may delay refunds for some low to moderate income taxpayers who file early. This act requires the IRS to withhold refunds on tax returns claiming the Additional Child Tax Credit or the Earned Income Tax Credit until mid-February. This change is designed to give the IRS more time to detect fraud and other potential occurrences. The IRS will release affected refunds on February 15, but these may not arrive in your bank accounts until the week of February 27.
Change 3: New ID numbers
Individuals who have tax-filing or payment obligations under U.S. law but are not eligible for a Social Security number use identification numbers (ITINs). The PATH Act requires that certain individual taxpayers may have to renew their ITINs. Any ITIN that hasn’t been used on a tax return at least once in the past three years, as well as any ITIN with middle digits of 78 or 79, must be renewed before your return is processed. Anyone filing a tax return with an expired ITIN may experience processing and refund delays, as well as denial of some tax benefits until this number is renewed. The renewal process may take up to 11 weeks to process during tax filing season.
Below, I’ve compiled a few tips to make the process of filing your taxes painless and headache free. Of course, these are only suggestive and you may already have a system in place. In case you’re looking to manage this season, you can start with these.
Tip 1: Organize Your Docs
Organize your tax forms by category and put anything related to your income (W-2s, 1099s, and other forms) together. Gather up your receipts for expenses. I divide my work and personal receipts throughout the year and organize them along the way. If you do this all along and store them in binders, you will have everything ready to go.
Tip 2: Set a deadline
Although taxes are due April 18, I’d suggest you pick an earlier deadline. Each year, about 20% wait until the last couple weeks to file. Personally, I’ve witnessed my friends’ anxiety levels peak around this time and I give myself enough time for errors. An earlier deadline will give you a buffer so you don’t have to hurry through the paperwork and stress over missing a tax deduction or tax credit. You could also receive your refund faster if set an earlier date, and who doesn’t want extra cash?
Tip 3: Maximize your deductions
The IRS reports that 75% of taxpayers take the standard deduction, but including a few additional receipts may push you over the standard deduction amount and lower your tax liability. Don’t forget about deductions such as charitable contributions and job search expenses.
Tip 4: E-file your taxes online
With so many changes in the digital space, online and mobile apps make filing your taxes more convenient than ever. You can also file anytime, anywhere and move across devices. E-filing is beneficial, and receiving confirmation that the IRS has received your return is the biggest benefit of all. You can e-file from your phone using the TurboTax Mobile App to prepare and e-file your taxes. Also, take a photo of your W-2 from your phone or tablet and watch your information transfer to the correct forms, making your tax prep effortless.
Tip 5: E-file with direct deposit
E-filing with direct deposit is faster, easier and more secure than filing a paper return and mailing it to the IRS. The IRS expects to issue 9 out of 10 federal tax refunds in 21 days or less. Direct deposit also eliminates the chance of a lost or stolen refund.
Tip 6: Double check for credits
Check for tax credits such as the Child Care Credit (worth up to $1,000) and the Earned Income Tax Credit (worth up to $6,242) if you have three or more kids. Tax credits allow you to keep more of your hard-earned money.
Tip 7: Contribute to an IRA.
Help lower your tax bill or increase your refund. You can contribute up to $5,500 ($6,500 if you’re over 50) to your traditional IRA up until April 18, and still get a deduction for your contribution.