Last-Minute Income Tax Savings for the Tax Season Procrastinator

Posted on March 29, 2016

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Increasing Your Income Tax Savings

income tax savingsThere are just a few weeks left before Tax Day, but many taxpayers hold out until April to get started on sorting through paperwork and filling out forms. There are income tax savings that you can still capture for this year’s tax return, if you haven’t yet filed.

Here’s a sampling of the ways you might still impact your overall tax burden:

Open a traditional IRA: If you are looking for a way to reduce your taxable income, opening a traditional IRA is the perfect solution. As long as you contribute to the IRA before the April 15 deadline (or April 18 this year), you can deduct up to $5,000 from the taxable income on your tax return. One thing to note: be sure to designate your contribution as a 2015 investment, so that it is not mistakenly recorded as a 2016 transaction.

If you are self-employed, you should seriously consider contributing to an IRA. Not only does it reduce your taxable income (which can be an important step for reducing those hefty self-employment taxes), but you also need to be focused on building retirement wealth in the absence of a 401(k) or other retirement investment option that might come with an employer.

Contribute to an HSA: If you have a high-deductible insurance plan, you should think about contributing to an HSA, or Health Savings Account. The beauty of a HSA is that, even if you don’t use the amount of money you anticipate for health costs, you can invest residual funds at the end of the year. Unlike other options that have a use-it-or-lose-it policy, HSA presents an option that saves you significant money on your taxes without the risk that you won’t use the money.

Follow the rules: If you owe money that you can’t afford to pay on Tax Day, file anyway. Otherwise, you’ll incur additional penalties and only increase the total amount you are required to pay. It’s a good idea to talk with your accountant about the appropriate steps to take when you can’t pay your bill.

Likewise, if you decide to file an extension on your tax return, you should still pay the estimate of what you’ll owe on time. Filing an extension does not extend your payment date. If you fail to pay the estimate of what you’ll owe, expect to pay penalties and interest later.

Get all of your credits and deductions: Before you file your tax return, it’s worth making sure that you are getting all of the credits and deductions you are entitled to receive. For instance, if you made improvements at home, check to see if any of the improvements are eligible for an energy credit. If you run a small business, there are also credits related to employee benefits and other possible business credits. Take time to ask a few questions and be sure that every possible credit and deduction is being applied.

At AccuBiz, Bert Doerhoff, CPA and his staff have decades of experience working with clients to make sure that every possible income tax savings option is captured on the return. If you would like to talk more about income tax savings, contact the office of AccuBiz for an appointment.

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Posted in: Small Business