What You Need to Know About Your 2016 Tax Return
What comes around every year, induces fear and panic, and leaves you feeling utterly bewildered? That’s right… TAXES! We hate to talk about them, we hate to pay them, but whether we acknowledge it or not they’re a huge part of our finances. So what do you really need to know? Let’s break it down.
Tax Day is April 18, 2017
Traditional knowledge is that Tax Day is typically on April 15th, but procrastinators have two factors working in their favor. April 15th falls on a weekend this year, and that following Monday is Emancipation Day in Washington D.C., which means your tax return isn’t due until April 18th. Your state return may be due on April 17th if that state doesn’t follow the federal holiday schedule, but most do. Also keep in mind that in order for your return to be filed on time it will need to be postmarked on April 18th, or if you’re filing electronically, it needs to be submitted by midnight on April 18th, but does not need to be accepted by the IRS by midnight in order for it to be timely.
If you run out of time, at least file an extension. That will allow you to delay filing your return until October 16th, but you will still have to submit your estimated payment by April 18th.
Healthcare Matters
The Affordable Care Act has caused a lot of confusion from a tax filing perspective. If you had health care all year either from your employer or that you purchased from the government, you have nothing to worry about. You should receive a Form 1095 as proof of insurance in the event you are audited. In cases where you did not have healthcare for the entire year, there are some exceptions that may keep you from paying the otherwise mandatory penalty. There is an exception for low income earners as well as if you had coverage for eight of the twelve months. Numerous other exceptions exist, and the online tax preparation software does a fairly decent job of walking your through those exceptions.
When to Itemize Your Deductions
Do you own a home? If not you probably won’t benefit from itemizing your return. This is the general rule I tend to tell people when they are wondering if they should itemize their deductions. If you own a home the mortgage interest, real estate taxes, and private mortgage insurance (PMI) premiums are all deductible. Other common deductions are the income taxes you pay to your state and charitable donations. Often there are questions as to what documentation you need to have for charitable donations. Cash donations should have a receipt associated with them and non-cash donations (under $500 per charity) should have some sort of receipt of transaction associated with them (i.e. a slip from Goodwill confirming your donation of used clothing). It’s up to you to estimate their value unless it exceeds $500 in which case an appraisal may be necessary. None of these receipts need to be submitted with your return, but should be kept for at least three years in the event the IRS requests the proof.
That Tax Prep Software May Cost You
Even as a professional tax preparer, I still use online software to prepare my personal returns. It honestly just makes things easier and faster. Both TurboTax and TaxSlayer are good programs, though I’m slightly partial to TaxSlayer. It tends to be cheaper and more intuitive in my opinion. Unfortunately, despite all of their advertising of their free tax return preparation, it’s very rare to be able to get your return filed for free with them. If you have any income from interest or dividends, want to itemize your deductions, or have to file in more than one state, free goes out the window very quickly. Even so, it still seems to be quicker and less painful then working through the IRS e-file system unaccompanied, so the investment may be well worth it.
You May Qualify to Have Your Taxes Prepared for Free
Alternatively, you may be able to get your taxes prepared by an IRS-certified volunteer for free. If you make less than $54,000 of income a year the The Volunteer Income Tax Assistance (VITA) program may be able to help you. They have locations all over the country and often offer night and weekend hours to accommodate your schedule. You can even drop off your return at some sites and pick it up at your earliest convenience. It’s a great service that doesn’t get enough credit, so if you think you may meet the qualifications check here for more information and locations near you.
Do you have a tax related question? Submit it here, and we will consider including it in our next tax article.
Written By: Lindsay Dell Cook
Lindsay Dell Cook is an accountant, turned writer and founder of Budget Babble. She lives in Philadelphia with her uber supportive husband, and enjoys taking their adorable mutt for walks or reading a good book while buried under a pile of cats.