Tomorrow is April 15. While we sincerely hope that no one spends the day in a panic and the evening in line at the post office or wrestling with tax prep software in a desperate attempt to make that midnight deadline, we know it will happen. We wonder, though, if it might be wiser to file for an extension than to speed through the tax forms.
Moving too quickly through a 1040, even a 1040-EZ, is a good way to make a mistake, and even a small mistake can mean a delay in a return or, worse, a penalty for underpayment. An extension will give you time to check your work, to make sure you have included — or excluded, for that matter — everything you should. And don’t be afraid an extension will turn the IRS’ Eye of Sauron to your return. Tax attorneys and accountants agree that an extension does not warrant an automatic red flag.
If you need more deductions, consider making a last-minute contribution to your traditional or Roth IRA. The deadline is April 15 for everyone, but there are contribution limits, age considerations and deduction limits.
For example: According to the IRS, if you are under 50, you may contribute as much as $5,500 for the 2014 tax year. (Rollover contributions and qualified reservist repayments are not included in that total.) Your entire contribution may not be deductible if you or your spouse are covered by an employer-sponsored retirement plan or if your adjusted gross income is more than the IRS allows. You can jump over to the IRS website for more information about retirement plans and income thresholds.
If you are divorced with minor children, you may want to consider switching deductions with your ex. There are significant benefits, according to one tax expert, to having the spouse with the lower income take some deductions that the higher earner would traditionally take. Law changes that started in 2013 have eliminated itemized deductions and personal exemptions for people with an adjusted gross income over $376,000 (single) or $402,125 (head of household).
Again, the best way, the most careful way to take advantage of these and other tax tips is to file for an extension and review your options. Really, it is not too late.
Source: Accounting Today, “8 Last-Minute Tax Tips,” accessed April 14, 2015