Tax Doctor Questions - Tips on How To Save on Your Taxes.

April 17, 2017

1. I’m so overwhelmed with my taxes, Is it better for me to not file a return at all?

​No, not filing is never the right answer. When facing a deadline, most taxpayers decide not to file a tax return at all. You should always go ahead and file a return, even if you can't pay the tax you owe. The penalties for not filing a tax return are 10 times greater than those for filing but not being able to pay taxes due.
 
If you go without filing your taxes for more than four months, you'll face a penalty of 25% of your outstanding tax due, along with interest on that balance. By filing, you can avoid most of those penalties and put yourself in much better shape going forward.
 
2. Is it hard to get more time to file?

No, It's easy to get some extra time to file. Just because you need to file eventually doesn't mean that you need to be in a hurry to do so by the April 18th deadline. You can get an automatic six-month extension of time to file your return regardless of how high or low your income is.
 
Remember that an extension to file isn't an extension to pay. Late-payment penalties of 0.5% per month start running after April 18th even if you don't have to file until October. Therefore, if you expect to owe tax this year, you should make an estimated payment with your extension request to get that balance paid off and avoid unnecessary additional charges.
 
3. How can I keep from overpaying income taxes each month?            

If you’re like 73% of Americans, you receive a tax refund, averaging $2,800. That refund may sound great, but really that means is that you overpaid your taxes each month.

Adjust how much money is withheld from each paycheck for taxes for the following year by resubmitting your Form W-4 to your employer. Making the change early in the year will allow it to take full effect, and filling it out properly can ensure the correct amount is taken out.
Then, consider putting that money to work.

4. What are ways I can keep from loaning money to the IRS throughout the year?

After adjusting your W-4, consider increasing your 401(k) contribution by that same amount. You won’t notice a difference in your paycheck, and that money will go toward your retirement instead of loaning it to the IRS.
                                                                       
5. What advice would you give to get an early start for 2017 income taxes?

• Tax loss harvesting throughout the year, not just in December, can reduce your taxes and help increase your after-tax investment returns. 
• Retirement contributions and conversions done early in the year are more effective because they allow your investments to grow for longer.
• Correcting your tax withholding's can allow you to save more throughout the year, instead of having to wait for your tax refund.

 
6. Will Deducting state and local sales taxes help me save on my 2017 taxes?

Choose to deduct state and local sales taxes. If you live in a state with low or no personal income tax or if you owe little or nothing to the state tax collector, be aware that Congress made the federal income tax deduction for general state and local sales taxes permanent. Therefore, you have the option of deducting either state and local sales taxes or state and local income taxes (but not both) on your 2016 return.

7. I’m a millennial, I play in a band and my brother is an Uber driver. We made the bulk of our money playing gigs. How do we make sure we’re maximizing our refunds?  

Millennials are receiving 1099s more than ever due to the on-demand economy (i.e. Uber/Lyft drivers, etc.). You may not realize it, but freelancing in these types of fields classifies you as a small business.
 
Acting as a sole proprietor means you can receive the benefit of several business deductions. It’s important for people to realize you’re entitled to certain deductions and to maximize their benefit from allowable business expenses
 
If you earn the bulk of your income from 1099s consider forming a separate business entity. The largest benefit is protection from legal liability beyond your business’ assets. Your personal assets are protected if your business faces legal action. 


For more tax tips visit our resource center, and if you would like to ask the Tax Doctor a question fill out the form below our contact our office to get your questions answered. We also have a frequently asked questions page that answers many typical tax questions. We look forward to