If you haven't already filed your 2017 taxes, you aren't alone. More than 20 percent of Americans hadn't filed as of last Friday, according to the Internal Revenue Service. So if you're a last-minute filer, Tax Mama Eva Rosenberg has some advice.
What exactly is due today, April 17
There are so many things due. Today, we need to deal with the IRS taxes for last year if you haven’t paid them, the state taxes for last year if you still have a balance due. If you’re going to fund an IRA or Roth IRA, today is the deadline. And if you have to finish funding a health savings account, again today is the last day to do that. To top all of that off, we have the IRS first quarter estimate and state first quarter estimate for those people who have to make estimated tax payments.
How to prioritize what to pay
The things that absolutely expire and you can’t pay later and get any tax benefits from would be the IRA contributions or health savings account contributions, if you qualify. Today is the drop dead date. You can’t get a deduction later. After that, the next thing to pay is your estimated taxes for 2018. You would think it should be last year’s taxes, but if you're going to be owing a lot of money to the IRS or the state, they won’t give it to you unless you’re in compliance for this year. If you’re not going to owe a lot of money, then you're OK to pay last year’s taxes first.
What to do if you don't have the money to pay
File IRS form 1127. That’s an extension of time to pay without penalties, so you can get a little bit more time, up to six months, to pay without penalties. But whatever you do, if you owe money, put your tax return on extension. Don’t file it. That will give you six more months to file your return. Find ways to reduce your taxes and raise the money to pay those taxes and reduce some of the potential penalties. Just filing that free extension form, 4868, which you can do online, will save you 5% per month. That’s a fortune.
Is it ever wise to use a credit card to pay taxes
A lot of it depends on how good you are at managing your money. If you use a credit card with a zero percent rate, you can stretch that payment out for up to 18 months and not have the IRS attaching your bank account if you miss or are late with a payment. Credit cards can be really good, plus if you’re a part of a reward program, that will add bonus points to your reward program, so there can be real advantages to somebody who knows how to use a credit card. But if you pay by credit card on the IRS site, you have a fee of 2-3% that they call a convenience fee. The IRS and state don’t pay the merchant fees. We do.
For those who've already filed 2017, what they should do to prep for 2018
Review your withholding, because the IRS issued new withholding tables because of the new lower tax rates. Take a look at your withholding and see how much you’re going to end up getting withheld for the year including bonuses and overtime and adjust your withholding or start making adjusted payments to catch up.