Five Tax Tips for the New Year

Tax Planning On white background series with models in various holiday related poses with gifts, confetti, etc.

Happy New Year! This is a time of resolutions for the new year – and taxes for the past year. As we head into January, it’s time to think about filing your tax return. Here are five tips to make this year’s tax time seamless.

Pay estimated taxes. If you think you’ll owe taxes for 2015, pay your fourth-quarter estimated taxes by January 15 to stop penalties from running. And make yourself penalty free for next year when you prepare your tax return by asking TurboTax to compute the estimated taxes you must pay for the coming year.

Fund your retirement account early. Your contributions to a retirement plan such as an IRA, SEP or SIMPLE can be made as late as the tax deadline in 2016 and still give you a tax deduction on your 2015 taxes. But you gain nothing by waiting until the last minute – if you contribute early in the year, you can have your investments working for you that much longer. So fund your retirement contribution early this year.

File your tax return early. If you are due a tax refund, there are reasons to file early. First, you’ll want to get your tax refund as soon as possible, and filing early before the rush will speed the process. Secondly, TurboTax makes it easy to file your taxes and opens for filing on January 4th.

File early for financial aid. If you have college age kids or are in college yourself, you need to file early for FAFSA (Free Application for Federal Student Aid). You don’t have to attach your tax return to the form – once you have filed, your tax information is sent directly to FAFSA by the IRS. Since FAFSA paperwork for 2017 can be filed as early as October 1, 2016, your 2015 tax return will do double-duty as the basis for both 2015 and 2016.

Give yourself time. Even if you think you’ll owe taxes, it will be helpful if you prepare your tax return early, so you’ll know how much you owe and have more time to figure out how you are going to pay it. If you know how much you owe, you can also request an installment agreement with the IRS to pay off your tax liability.  Knowing this earlier can give you piece of mind so you can move forward and plan for 2016.

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