New Year’s is days away and that mean’s tax filing time is just around the corner. Although you may procrastinate when it comes to filing your return here are few items that can’t wait:
1) Make sure your mailing address is up to date with your current and past employers.
Employers are preparing to process W-2’s and 1099’s in January; that’s only days away. Make sure your employer knows where to send your W-2’s. Many companies outsource payroll and tax form filings so getting your manager or human resources department the right information is imperative. If you switched jobs within the year you will need to contact your old employer too if your address has changed.
2) Check your federal and state withholding on your check stubs.
Checking the federal and state withholding on your check stub is a good idea to do regularly, but checking the accumulated withholding at year end is a good way to get an idea of if you are under (or over) withholding. Under withholding may seem nice when you’re getting a larger net paycheck throughout the year, but this can cause a large lump sum payment due to federal and/or state when you file your return. The IRS provides a walk-through calculator to figure out what your withholding should be. You can find it here.
If you need to adjust your withholding contact human resources or your supervisor and request to submit and updated W-4 or L-4. This can also be done throughout the year if you have life changes that will affect your taxable income such as getting married or having a child.
3) Make any last minute charitable donations by December 31.
If you’re like me, there’s probably a bag of old clothes sitting in your house that you’ve been meaning to donate to Goodwill or the shelter down the street. Act now! Drop the bag off and make sure to get a dated receipt, preferably one with a dollar value. Cash and item donations made to tax qualified charitable organizations before year end can be included on your Schedule A – Itemized Deductions when preparing your tax return. Things to remember:
- If you give to your place of worship, always fill out the envelope to get a statement at year end. God knows your heart, but the IRS needs to know your amount.
- Make sure your donations are going to an actual nonprofit. The recipient should be able to give you their tax ID number to cross reference with the IRS database of qualified organizations. You can check out an organization’s status at Exempt Organization Select Check. If a nonprofit loses their exempt status you will not be able to deduct your donation for that year.
- If you are not itemizing, a donation will not affect your tax liability.
4) Make any needed estimated state tax deposit by December 31.
Like charitable donations, state tax payments made before year end can be used to increase your itemized deduction. (Note: State taxes are an itemized deduction as of December 2017, but has been a hot item in tax reform.) Generally, 4th quarter estimated tax deposits are due January 15th following the tax year end, but accelerating the payment will allow it to be used on the current year’s tax return.
5) Apply for healthcare coverage exemption if applicable.
Let’s talk health insurance. Eww, hot topic. Neutral or hate it, the required health insurance coverage is still in play for 2017. What if you really couldn’t afford it? What if life happens? The government provides some exclusions from being subject to the penalty if you qualify for an exemption. HealthCare.gov provides a list of exemptions that you can apply under. You will need the exemption certificate number when filing your tax return. Please note that certain exemptions (income below filing requirement, health care sharing ministry, living abroad, and others) do not need an exempt certificate number to be relieved of the shared responsibility payment.