The end of January signals the start of tax season as the W-2s begin to roll in. Whether you expect a nice refund or owe the government a sizable chunk of change, completing your tax returns can be stressful for everyone. Check out these tips to help you as you begin this yearly process:
The Looming Deadline — The regular tax deadline for this year is April 18th, 2017. Usually, April 15th is the official deadline and is well known by most taxpayers. However, this year, April 15th falls on a Saturday and Monday, April 17th, is Emancipation Day, which is celebrated in Washington, D.C., so the tax deadline is three days later than usual. However, it is generally wise to file your taxes as early as possible. The Internal Revenue Service (IRS) begins accepting returns as soon as January 1st, and you can email your returns starting on January 23rd. Note that early filing can result in a quicker refund. However, if you genuinely need more time to file, you may request an automatic 6-month extension and your taxes will be due October 17th, 2017. Keep in mind that the extended deadline gives you more time to file your tax return, but not more time to pay the tax you owe. Any tax not paid by the April tax deadline may be subject to penalties and interest.
Know Your Tax Breaks — In order to pay as few taxes as possible, you need to know what tax breaks you are entitled to. There are popular tax breaks for charitable donations, home ownership and having dependent children, as well as lesser-known deductions for health insurance, financial planning services and moving expenses. If you don't feel comfortable filing your own taxes, you can always seek the help of a qualified professional to review all of your possible deductions.
Spending That Refund — As much as you may hate filing taxes, according to recent IRS data, nearly eight out of 10 tax filers receive an average federal refund of $2,800. Even though a refund is nothing more than a return of your interest-free loan to the government, make sure you wisely invest your windfall. You could go on a spontaneous vacation or take a shopping spree, but there are smarter ways to use these funds. You can use your refund to pay for maintenance and upkeep of your car, which is likely to be one of your top investments. It is also wise to pay down any debt you may have, especially high-interest debt like credit cards. Maybe now is the time to consider purchasing a home and using your refund to help with the down payment?
If all of these tax considerations have your head spinning, AAA is here to help. If you want to prepare and file your returns yourself but need a little help, try TurboTax. TurboTax is an online tax program designed to lead you step by step through the filing process, making sure you claim all deductions and credits along the way. AAA members can save up to $20 on TurboTax. If you want an affordable professional to handle the filing for you, contact H&R Block and let them file for you. New clients who are AAA members receive $25 off, and returning customers receive Tax Identity Shield for free with a paid return.