2015 Tax Filing Deadline for Who?

2015 Tax Filing Deadline for Who?

Why the Tax Filing Deadline Doesn’t Apply to You.

Does the deadline apply to you?
Does the deadline apply to you?

For years it has been the unspoken conventional wisdom to make sure to file your taxes by April 15th every year. There has been a lot of news coverage and hype surrounding this issue of the tax filing deadline. At the height of the hype, news crews are out at the post office on April 15th interviewing filers, focusing on the postmark stamped on the envelopes and all sorts of other hyping madness. So what is it all April 15th filing deadline about? Why the hype about April 15th? Will you miss out on some benefit or face some negative consequence for filing after April 15th? Maybe, and for most “NO”.
The vast majority of people in the U.S. that will file taxes work some sort of job for a living. It just depends on what type of job, from there it moves up in sort of a pyramid shape with the regular employed folks at the base, then the self-employed, small business owners, investors, major business owners, the rich and so on. The higher up, the less people there are in any specific category until you reach the almighty 1%, and they have their tax own issues. Whether you work for a government entity or private company of any kind, it is still working and you will fill out a W4 where you classify your legal status for employment and exemption status. That document is used to determine how much taxes are to be withheld based on you salary level and exemptions you put down. By law, the employer must have you fill out this document, and withhold taxes from your pay/ compensation accordingly if you work full or part time directly for that employer. If you do not work full or part time directly for that employer then they must send you a form 1099 instead at the end of the year, this form will tell you how much the employer reported to the government that they paid to you, with or without taxes. This is typically for contract and task based types of work. Either way, you usually have the chance to elect exemptions and go from there.
At the end of the year and the beginning of the new year, the employer is required by law to send you a form W2 that details all monies paid and taxes withheld, that is the primary document the majority of workers will use to file their taxes. Although the profile of working taxpayers is very broad ranging from single person head of household to married with kids and so on, the majority of regular working people will have paid enough taxes or paid too much, especially once tax credits are added in. That will be the reason for a refund, once you fill in the 1040a or 1040ez whichever works for you, at the end it will let you know if you’ve overpaid by any amount and that will mean a refund is due. Conversely if you’ve underpaid, it’ll state that amount as well and that is what you will owe.
Now about this timeline, unless you are going to need to pay any money you owe you do not have to file by April 15th. This deadline applies to people that owe money and must pay or claim an extension to file or pay so they will not receive and extra penalty fee on top of what they already owe. That’s it. If you know you are not going to owe money because you are one of the millions of regular working class folks that typically get a refund of some sort every year, then the deadline doesn’t apply to you. If you want to you can file your taxes in August, October or whatever month you like, it won’t make a difference if you don’t owe any money. The only thing is you must file be the end of the year, however, even then if you don’t owe any money it may be of no consequence. Except that if you don’t file by the end of the year for the previous year, (by end of 2015 for 2014) the IRS will contact you asking you to file because they’ve received your employer’s info, and if you need your tax returns for anything like loans or something, you won’t have them on hand. It is primarily when you owe money to the IRS that timing is seriously everything.

Timing is everything when you OWE
Timing is everything when you OWE

So unless you’re under some pressure or just plain ol’ anxious to get back any refund due, and truth is most of us see tax refunds as bonus and surplus monies, then you can file at any time during the year. After all of the hype, all of the commercials, the tax prep advertisements and the sales targeted at people getting refunds you can file. You can file and get your refund electronically the same way you would have in the eye of the hype storm. Except now, you might think a little more clearly as to what to do with that bonus surplus, now that you have tax money and the retail feeding season is over.
What’s really crazy, how many people that aren’t aware of this and are swept up into the hype of a tax deadline that doesn’t apply to them. I remember years ago asking everyone at the job about the filing deadline and most had no clue. Once your financial situation becomes a little more complicated by investments, capital gains, real estate rentals, small business profits, inheritances, stock options, 401k loans, disbursements, small business investments, depreciation tables, donations, running charitable organizations and many other things that make taxes complicated, then it’s necessary to be on your game maybe even on a quarterly basis and you’ll definitely know it’s necessary. Until then, if you’re doing the typical work grind like most folk then you’re in pretty good shape and don’t have to let the hype steer your actions.

No deadline when your getting a refund
No deadline when your getting a refund

NON-Deadline reminders.
• You can file your taxes all year long with no penalty if you don’t owe
• You can download tax software and do it yourself all year long, it costs the same
• You can e-file your taxes before, on or after April 15th and get your refund the same way
• Tax preparers push the deadline for business reasons, although it doesn’t apply to most people
• Car dealers and the retail industry market special campaigns for tax season

Deadline reminders

  • It applies of you owe money as a pay by date or extension request deadline
  • The deadline does apply if you are going to use a part of the refund for an IRA contribution or top open an IRA

Remember to save a lil’ bit if you can or pay down some crazy interest debt.


401k and Roth IRA Cash Stack and Stash

401k and Roth IRA Cash Stack and Stash

401k’s and IRA’s Protected from Creditors Liens, Judgments and Bankruptcies

Cash under lock and key
Cash under lock and key

Tax time offers a golden opportunity to open and contribute to an IRA if you haven’t done so already for 2014, and make that contribution tax deductible, while saving and investing money. These are some of the benefits of doing your own taxes, you sometimes uncover information that you may not have otherwise found or the tax preparer deems you wouldn’t be interested in. So, there are two types of IRA and the most popular for middle income folks is the Roth IRA as it lets you make after tax contributions, and you can take penalty free withdrawals should the emergency arise. Of course there are some rules surrounding withdrawals, without going into them specifically I will note some benefits of The IRA and 401k accounts that sometimes get overlooked. For details on the differences between Roth IRA or Roth 401k versus IRA and 401k I suggest checking out http://www.investopedia.com/terms/r/rothira.asp
Another major and often overlooked benefit of retirement plans is that they are protected from creditors if you are in bankruptcy or against judgments and liens. So while a creditor may levy or place a lien on your bank account for a judgment against you, they are unable to get at your IRA, 401k or other type retirement plan account. This also covers Educational IRA’s where the account is setup for the benefit of a child, yours or not, to pay for college education costs, that account is protected too. There are limits you can put into IRA’s, Child Education IRA’s and 401k’s be them of the Roth type or not. However, in some cases those limits can be pretty high depending on who you are and how much you have to put away. Also, you can take withdrawals or loans from these accounts under certain circumstances, just in case there is an emergency! Imaging your bank account having a lien during an emergency, that would be crazy. Of course, as conventional wisdom would have it, you definitely should pay all of your bills all on time, avoid getting and answer any or all judgments entered by creditors or otherwise. However, in reality, many folks are finding themselves with judgments and liens and don’t really know how far they reach or can reach. Let’s face it, when you’re under attack and you’re resources have been locked, it is comforting to know that something is safe.

Money protected from uncertainties
Money protected from uncertainties

If you find that you only have an employer sponsored 401k, some administrators may or may not allow you to make contributions outside of your payroll deductions, while other companies such as Fidelity will allow you to link your brokerage account if you have one. If you have a 401k handled by Fidelity, it may be time to consider getting a brokerage account with them too. That’ll make it so you can have access to all sorts of cool options that should last you beyond your employer. That being said, it is beneficial to have a IRA or Roth IRA account that you manage yourself. You make the contributions, however much you would like, you select the fund to invest in and so on. Most brokerages will allow you set up an IRA ,Education IRA or Roth account. A few of the best known brokerages to consider are https://www.fidelity.com/https://investor.vanguard.com/ira/vanguard?WT.srch=1 , www.usaa.com or www.tdameritrade.com to name a few.

Quick couple of notes,
• if you have children you should consider the Education IRA which is much like a 529 plan. Even if you only open it with $25. 00 to start and direct deposit $25.00 a month, many plans allow this to open an account. So you don’t need to have a bunch of money to get started. The same applies to regular Roth IRA’s for you.
• If you’re expecting a tax refund, you can contribute any amount up to the annual limit to the 2014 contribution. Again, if you don’t have an IRA, it’s a good time to start one even with a few dollars that you’re expecting. It’s not all or nothing, so throw a few bucks that way. Most people that qualify for large returns already have it earmarked, but can still at least toss in $25.00 or $50.00 to get started.
• Consider beneficiaries; don’t leave this overlooked as it is very important. Put someone down now, you can always update it if you need to. And while considering beneficiaries, think about your will or living will. We’ll talk more about wills later.

Doing these sort of things and being set in place regardless of the amount of money you have on hand, be it a little or a lot, allows you to be prepared when the time comes to make financial moves. In the meantime, you build with what you have regardless of how small as low as $25.00 monthly. You can even suspend that if it becomes too difficult until things ease up. Getting set up in most cases cost very little or nothing other than some time dedicated to making things happen.

Taxing the Tax Refund

Getting Your Taxes Done, Can You Do it Yourself and Still Get a Refund?

Tax Software
Top 3 Consumer Tax Software. Almost in this order too!

Income tax season is right on us and so are the tax preparers looking to capitalize on those expecting high tax returns, those that are looking to maximize their return. In a lot cases these are your

local tax offices that hire a team of tax preparers to handle all of the business they expect every year at this time. They can hire all of these people because of the insane amount of profits they intend to make from giving loans on approved refund checks. Once they received an acknowledgement from the IRS that the refund has been processed and refund amount has been approved then they are willing to pay that money upfront, for a fee of course. Yes, a fee to get your money a bit faster. And, that is after they charge you to actually do your taxes. To many people this seems like no big deal, mainly because many people feel like it is free “bonus money” that they did not have to work for directly. Money that they are getting by just qualifying based on their profile and tax situation provided they go to the “right” tax place to get it done. There are stories upon stories of which tax preparer is better because they can get you more back on your tax refund. This amount of more, can sometimes be a matter of creativity on the part of the tax preparer. Tax filing time is not the time for creativity, people have to be more careful and really understand what is going on.

So, going back to this fee… In some cases the person filing the taxes may be charged up to 30% interest or higher and other fees for this upfront loan, this can cost up to nearly 50% of the refund when all is said and done. The large tax preparers have commercials and jingles to make these loans and short term financing seem appealing by offering to get your money right away. They may offer gifts, discounts, free visa gift cards and any other creative thing to get you to come in a take that loan with them. These preparers offer other financial services and tax planning and are usually very good at the services that they provide on a year round basis, however, from the end of the year until about March of the coming year is a special time. Because of the fees and the short term lending service that they run.

The primary target is the profile of the tax filer who qualifies for EIC, (earned income credit). This person is usually filing as head of household, takes responsibility for filing for any children in the house and earns less than roughly $46,000 annually. Although many people who qualify earn more than that amount, once the deductions, (childcare, charities, education loan interest, property taxes, medical costs and whatever else qualifies) are made it will usually will bring them below that amount, the new adjusted amount is known as the AGI (adjusted gross income). The legions of part time tax preparers that are trained and hired beginning in October of the current tax year are trained specially on handling people that qualify for EIC. They are trained to quickly identify, explain EIC, and get people to take the fast upfront cash for the fees and super high interest rate. For exact info on EIC limits and thresholds go to http://www.irs.gov/Individuals/EITC-Income-Limits,-Maximum-Credit–Amounts-and-Tax-Law-Updates

These places have been making money hand over fist for decades this way, not that making money is bad because surely it is good- very good. However, our focus is being a savvy consumer, informed on the basics of finance and making better decisions that serve us economically. We can’t possibly do this by giving away more than 30% of our money at any time.

So, there are several approaches to take toward this potential beneficial moment in time for ourselves.

You can:

  • Get your taxes done by the big guys, the H&R Block, Jackson Hewitt, Liberty Tax and have them filed electronically and wait for your refund either by direct deposit or the mail – no loan option.
  • Get the taxes done by someone else smaller and do the same thing at a lower cost, provided they are well versed at doing taxes. You don’t need to be an accountant or hire one in most cases.
  • Go online and do them at IRS directly for free if you make $60,000 or less, remember that’s your AGI.
  • Buy tax software, (download or buy the disk) and do it yourself by filing electronically.


The Do-it-Yourself Tax Software Option

This is my preference. There are many debates over which are the best Do-it-Yourself tax software out there. It seems to depend on what your preferences are as far as how it looks and the type of questions it asks, assistance offered and suggestions. Most tax software seem pretty much the same to me as I usually arrive at the same conclusion in the end, however, I’ve been using tax software for the past 12 years or more. I’ve used tax software for both personal and small business and it definitely gets the job done, but more importantly for me it makes me look at all of the financial details for the year as it relates to income and expenses for both personal and business profiles. That is purely a preference thing for me, many people would rather just hand someone all of the necessary documents or receipts and let them figure it out. Whichever works for you is good, I would encourage trying to do your own at least once and if it doesn’t work out you can always have someone finish it for you. I’ve come to learn a lot that a tax preparer would probably never go over with me such as depreciation tables and section 179 exchanges for business and the actual limit/ threshold for personal medical expenses related to the current filing year or the coming tax year. I will admit it can seem quite confusing the first time, but what isn’t that makes a difference? If your taxes are complex due to investments, business, and who knows what else, you can still do them yourself.


Do-it-Yourself Tax Software Upside/ Downside

  • The risk you take is you don’t get it at all. All you’ve lost is the cost of the software, maybe $50 depending if you buy and download online or get the disk. However, there’s no risk to your finances without filing it, so you can plug in the numbers all day as much as you want. You’re only out by the cost of the software.
  • The reward is potentially far greater;
    • Saving money on preparation fees, which can run in the hundreds depending on your situation.
    • Getting detailed insight on where your annual income and expenses by plugging in these numbers and answering the questions yourself.
    • Learning what you’ve been missing out on all along. Remember the term “Information Asymmetry”? Well, you have to know that you don’t know! Are there things you are missing out on that the preparer is not asking you? Is the prepare making some assumptions?


Tax software recommendations

There are several tax programs that are very good. I’ve used these top three: H&R Block Taxcut, TurboTax and Tax Act and they are all good. Of the three, Turbo tax is definitely a leader in the category. For a side by side feature review you can check out http://www.reviews.com/online-tax-software/ they do a good job a breaking down the details and looking at what’s important in tax software.