The Tax Man Cometh
“I like to pay taxes. With them, I buy civilization.” ~ Oliver Wendell Holmes Jr.
I can’t say that I like to pay taxes, but I hope his conclusion is accurate! Perhaps taxes do buy civilization but regardless, they do buy our freedom. Freedom from jail for tax evasion, that is! I guess they buy our freedom in the greater sense as well since they pay for our military. That part I can get behind and perhaps feel less horrible about the large dollars that go out of my house every year in taxes.
But this is not about how you feel about paying taxes. It is your reminder that it is almost April and April brings the tax deadline. Here are a few reminders for you:
This year, you actually have until April 18th to file and pay your taxes because of Emancipation Day falling on Monday and the 15th falling on Saturday. However, don’t wait around for the 18th to get your taxes going.
The April deadline also marks the deadline for making IRA contributions as well as Health Savings Account contributions for those who had a high deductible/HSA health insurance plan in 2016. Extending your tax return does not extend the deadline for making these contributions; however.
If you do file an extension, remember that filing the extension only extends the time to file the return; it does not extend the time to pay so you must make an estimate of your tax liability and pay in 100% of it or be subject to interest and possibly penalties.
If you cannot pay taxes due, don’t ignore it! You can request installment payments of the taxes due. Discuss your options with your tax accountant so that you can take action rather than face additional penalties. The IRS loves to impose penalties so make sure you are on top of your options to minimize the money you will have to pay in.
Make sure you gather up all of your charitable contribution receipts and include everything –$10 here and $20 there adds up. For your noncash donations, keep a list of all of the items donated and use a site like: https://www.goodwill.org/wp-content/uploads/2010/12/Donation_Valuation_Guide.pdf to come up with the value per item. You should keep this list with your tax records.
I am often asked by clients how long to keep tax records. The answer, like answers to most financial questions, is “it depends.” Here is how the IRS responds to that question: https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records
(Although the reference says small business, it is the same for employees.) It is a good practice to clean out your records each year after you file this year’s return. Go through the old records and be sure that you don’t need the record for some other purpose besides taxes. And definitely, make sure you shred all documents when it is time to get rid of them! If you don’t have a shredder, many organizations host shredding events (frequently for charities) around tax time so search for locations where you can shred.
Taxes are never fun but round up those records and get it done. You’ll feel better once you have tackled the task. And maybe you can be like Oliver and enjoy the fact that you are supporting civilization.
To your financial (and tax!) success,
Tana
