A Taxing Time of Year: 7 Tips to Help You Prepare

Estimated reading time: 4 minutes

Tax day this year is April 17. That gives you two-and-a-half months to get yourself organized, if you’re not already. Here are seven tips to help take some of the pain out of tax day, and to sweeten your retirement savings at the same time.

• $5,500 to a Traditional or Roth IRA up to age 50
• $6,500 to a Traditional or Roth IRA if over the age of 50

It’s important to note that the contribution limits are cumulative: A 44-year-old, for example, can contribute a total of $5,500 to one or both types of IRA.

How much of your Traditional IRA contribution you may deduct from your 2017 taxes depends on whether you also participate in an employer-sponsored retirement plan. Read more what the IRS says about maximum contributions. 

Over time, as you continue to contribute and the value of the assets in your IRA increases, you will continue to reap the tax benefits and build a good foundation for your retirement. This also argues in favor of making IRA contributions throughout the year, giving them more time to accrue value.

3. Organize your paperwork
Don’t let yourself become the person who pulls a shoebox stuffed with receipts, slips of paper, and IRS forms out from under the bed the night before your tax return is due. Take the time now to organize records related to your:

• Income: W2 forms from your employer, 1099s related to other income, receipts for income like rent.
• Payments made: Forms 1098 for mortgage interest statements or student loan interest payments, for example.
• HSA contributions you personally made
• Health care: Form 1095 if you received a subsidy for your health care insurance.
• Interest or dividends: Reports received from banks, brokerage houses, and other investments.
• Records of estimated tax payments you have made already.
• Investments: The price you paid or received for any stocks or funds bought or sold (outside of your IRAs)

• State and local taxes
• Mortgage interest
• Medical expenses that total more than 7.5% in 2017 and 2018
• Charitable deductions
• The cost of tax preparation, job-related expenses, and professional dues

You also may be eligible to claim tax credits, such as foreign tax credit, child tax credit, education credit, residential energy credit, and others.

5. Decide whether you can (or should) prepare your own tax return
If your tax return is straightforward (W-2 income, standard deduction, interest income), you can most likely complete and file your own tax return with little difficulty. Many cities, towns, and nonprofits even offer free tax-preparation assistance. Check out the resources at your local library.

6. If you work with a tax professional, choose wisely
Start by making sure that the professional you work with has a preparer tax identification number, or PTIN. Legitimate tax professionals also have a local business license and take continuing education courses to keep up with the ever-changing tax rules. Some, such as enrolled agents (EAs) and CPAs, can also speak on your behalf with the IRS in case of an audit.

7. File on time
Technically, paying your federal taxes is “voluntary,” but you don’t want to get on the wrong side of the IRS. Late filing means paying penalties. Here are some key dates:

• March 15: Partnership and S-corporation 2017 tax returns due.
• April 17: Individual and corporate tax returns due; requests for extension due; first-quarter estimates due from people who do not pay through withholding.
• June 15: individual tax returns due for citizens living outside the US.
• October 15: tax returns due from individuals who received a six-month extension

Read the complete IRS 2018 tax calendar.

Learn More with Entrust
Educating investors is one of our founding principles at Entrust. These tips, as important as they are, just scratch the surface of the tax and investment information available on our Learning Center.