Excellent news, U.S. taxpayers!
In 2017, Tax Day is pushed again to Tuesday April 18th, as a result of April fifteenth falls on a Saturday and the Emancipation Day vacation (anniversary of the signing of the Compensated Emancipation Act by President Abraham Lincoln) is pushed to Monday April seventeenth. Residents of Maine and Massachusetts get an additional day to file federal taxes as a result of Patriots Day falls on April 18th, 2017.
Nonetheless, getting a head begin in your return is a greater technique than ready till April 18th or nineteenth, relying in your state of residence. From growing the take-home out of your remaining paychecks for the yr to creating essentially the most out of a bonus examine within the first few weeks of 2017, let’s assessment 5 the reason why it pays off to prep for the 2016 tax season now.
1. Keep away from Withholding Extra Than You Want To
Practically eight out of 10 U.S. tax filers get tax refunds. This is not good for 2 causes. First, these people must get all year long with fewer {dollars}. The typical refund for the 2016 tax season was $2,777, or roughly $230 per 30 days. Would not an additional $230 per 30 days for a full yr present extra respiratory room in your funds and assist you pay down high-interest debt quicker? Second, the IRS pays you no curiosity on the refund out of your present yr. Now, that is a double whammy.
To seek out out whether or not or not you will have already withheld sufficient for this tax season, use the IRS Withholding Calculator and learn how to regulate your Type W-4. Chances are high that it is possible for you to to take house more cash out of your final paychecks from 2016 and keep away from having to place these vacation purchases on credit score.
2. Unfold Out Tax Legal responsibility
In fact, utilizing the IRS Withholding Calculator might reveal that you just’re behind your estimated tax legal responsibility. In that case, discovering out earlier permits you to take a number of steps to keep away from an enormous lump-sum fee subsequent yr. Right here is your recreation plan:
- Modify your submitting standing, variety of allowances, and variety of dependents on Type W-4 in accordance with the directions from the IRS Withhold Calculator to extend withholding on the following few paychecks;
- Enter a further quantity, if any, you need withheld from every paycheck on line six of Type W-4; or
- Submit a further estimated tax fee with the fourth voucher from Type 1040-ES due on January 17, 2017.
3. Increase Retirement Account Contributions
In 2016, you may contribute as much as $18,000 ($24,000 when age 50 and over) to your 401K and as much as $5,500 ($6,500 when age 50 and over) to your IRA. The catch is that all your contributions to an employer-sponsored retirement account should be turned by your final paycheck. Despite the fact that you may technically submit contributions to your employer-sponsored retirement account till December 31, 2016, your final paycheck might fall on, as an instance, December twenty third.
If that you just nonetheless have a number of room earlier than you hit the utmost contribution restrict to your 401K, you are in time to extend the contribution proportion out of your paycheck for the rest of the yr. Act quick as a result of some employers might make modifications efficient wherever from one to 4 weeks.
Within the occasion that you do not have a retirement account, discover out whether or not or not you are eligible to set one up by December 31, 2016. So long as you arrange your 401K or IRA by this date, any contributions to your retirement account that your employer makes by way of a fee examine or bonus subsequent yr earlier than Tax Day or the day that you just file your return, whichever is earlier, cut back your taxable earnings for 2016! (See additionally: 6 Good Issues to Do With Your Bonus)
4. Get Your Refund Sooner
The IRS points tax refunds typically in lower than 21 calendar days. By submitting your tax return earlier, you are growing your probabilities of getting your return processed quicker. By February 5, 2016, the IRS had acquired 26,670,000 returns and processed 26,133,000 of these returns. That is a 97.98% processing charge — not too unhealthy. Quick ahead to April 22, 2016, the variety of returns acquired by the IRS ballooned to 136,528,000 and the processing charge drops by 3%. The early (tax) chicken will get the worm (quicker).
Finishing your federal return early additionally helps you get your state refund quicker. Keep in mind that this yr many states elevated the required processing time attributable to new tax fraud prevention procedures. For instance, the Hawaii State Division of Taxation elevated the processing window from six to eight weeks to roughly 10 to 14 weeks.
To assist enhance the chances of a quicker refund, decide to file your return electronically, at any time when attainable, and obtain your refund through direct deposit. (See additionally: 8 Tax Return Errors Even Good Folks Make)
5. Stop Tax Id Theft
Final however not least, a key advantage of making ready and submitting your 2016 tax return early is that it prevents tax-related identification theft. This is a pattern. As of February 29, 2016, the IRS had recognized 31,578 fraudulent tax returns involving identification theft. Simply six days later, the variety of recognized fraudulent tax returns elevated by over 10,500!
Relating to submitting your return, each single day counts. The longer you wait, the upper your likelihood in changing into the following sufferer of tax-related identification theft.
