Tax Season Madness: Last-Minute Tips

March Madness is upon us, and while that term often refers to college basketball, if you’re like the majority of Americans, it can also apply to tax season. The IRS tax deadline will be here before we know it, and while it might be late in the game to do much about lowering your tax bill or increasing your return, here are a few tips to help make your 2019 tax return as smooth, painless, and advantageous as possible.

Max out your traditional IRA

This is the easiest way to lower your tax bill after the end of the calendar year, and you can make contributions for the 2018 tax year until the April 15 tax deadline. Contributions top out at $5,500, or $6,500 for those 55 years and older, and it’s all deductible on your 2018 tax return. Contact me to see if this strategy will work for you.

Beware of common mistakes

It seems obvious, but common blunders include social security numbers with mixed-up digits, missing signatures, and bad bank account numbers. These mistakes could cost you, literally, so double and triple check your personal information.

To itemize or not to itemize?

Due to the Tax Cuts and Jobs Act, which nearly doubled the standard deduction, itemizing deductions is now obsolete for millions of taxpayers. Unless your financial situation has changed drastically, if you didn’t itemize in the past, you won’t need to do it now. The standard deduction for 2018 is $24,000, so unless your itemizable deductions top that number, itemizing isn’t worth it.

Contribute to your HSA

HSA funds can essentially act as an addendum to your retirement savings because funds can be invested and carried over year after year.

Can’t pay? File anyway

If you owe the IRS money, your unpaid balance will result in a penalty of 0.5% of the unpaid balance per month or partial month. However, failure to file will cost you a lot more: a monthly penalty of 5% of the amount owed. So even if you can’t pay, file your return or request an extension. Read on to find out what to do when you can’t pay the full balance.

Set up an installment plan

The IRS might not have the best reputation, but the agency will work with taxpayers who show that they’re trying to pay their taxes. An installment plan allows you to make monthly payments up to 72 months until the balance is paid in full. This requires a setup fee, but it’s less if you arrange for direct debit from your bank account, and interest on your unpaid balance will still apply.

Request more time if necessary

You can file for an extension before April 15 with Form 4868 for automatic approval, which will give you until October 15 to file your tax return. Keep in mind this extension is just for filing and doesn’t include an extension for payment on taxes owed. If you don’t pay by April 15, your bill will be subject to interest and penalties. However, you can request a 120-day grace period from the IRS to come up with the payment, but you’ll still owe interest and other fees on the balance until it’s paid off.

Here’s How Congress Plans to Make the IRS More Taxpayer Friendly

The House recently passed the Retirement, Savings, and Other Tax Relief Act of 2018, which includes the Taxpayers First Act of 2018: legislation created to protect taxpayers from unfair practices as well as improve IRS operations. If the Bill makes it through the Senate, we’ll be seeing a more modernized and simplified IRS.

The bill directs the IRS commissioner to submit a plan for improved customer service within a year and a full plan to completely restructure the agency by September of 2020. The focus of this revamp will include, but not be limited to, the following:

Customer Service

The goal is to enhance customer service by adopting the private sector best practices of customer-service providers, which would mean updating guidance and training materials for IRS customer-service employees as well as developing means for quantitatively measuring the progress of customer service strategy. This would include providing taxpayers with more secure and varied means of communication, such as online and telephone call back services.

Cybersecurity

The IRS would initiate a collaborative effort with the private sector to improve cybersecurity and protect taxpayers from identity theft refund fraud. Along with implementing an information sharing and analysis center, the initiative would include appointing an IRS Chief Information Officer.

Electronic Services

The plan would broaden electronic service assistance, such as creating individualized online accounts and portals for taxpayers to access taxpayer information, make payments of taxes, and share documentation. This includes adding the ability for taxpayers to prepare and file Forms 1099.

Property Seizure

One of the IRS’s most forceful capabilities is property seizure. The new bill would still allow the IRS to pursue the seizure or forfeiture of assets, but only if a) either the property to be seized was derived from an illegal source, or b) the transactions were structured for the purpose of concealing a violation of a criminal law. It also includes new post-seizure procedures to protect taxpayers who had property taken by the IRS for violating the reporting rules. And should a court return funds to a taxpayer whose assets were mistakenly seized, the new bill provides taxpayer exemption for interest liability.

Other areas of improvement covered in the Bill include an independent appeals process for all taxpayers with a legitimate claim, easier access to equitable relief for innocent spouses on a deceptive joint return, and greater restriction on the IRS to issue a John Doe summons for suspected tax code violation.

Here’s How Medicare for All Could Affect Americans

According to CNBC, 70% of Americans support Medicare for all, but the term is still murky for Americans. What does it actually mean and how could it affect Americans?

Implemented in its most historical meaning, Medicare-for-all would completely wipe out private coverage and replace it with a single-payer health insurance – a national government-run program that would cover every American. Under such a plan, deductibles, premiums, and co-payments would likely be things of the past. The government would deal directly with drug makers, which would lower prescription costs and streamline the administration process. Reuters defines it as “a publicly financed, privately delivered system with all Americans enrolled and all medically necessary services covered.”

How Much Would it Cost?

A study recently released by the Mercatus Center at George Mason University found that Sen. Bernie Sanders’ plan for universal healthcare, which is the highest-profile plan for Medicare-for-all, would increase government healthcare spending by $32.6 trillion during its first 10 years.

What Opponents Say

Supporters of Medicare-for-all are typically quick to point to Canada, which has successfully implemented a single-payer system, though Canadian citizens pay more in taxes than American citizens. Opponents argue that even as taxes and federal costs for health care rise, expenses for individuals and companies would drop, potentially canceling each other out. They’re also likely to refer to the Mercatus study for a different reason: the report suggests that national health expenditures – which include all national health spending (i.e. state Medicaid programs and private employees), not just government spending – could decline by $2 trillion over the first 10 years of implementation, though the author of the study admits that this is an unreliable number because it depends on too many variables.

What Critics Say

In 2016, the Urban Institute, a nonprofit research organization, came up with roughly the same number as the Mercatus study: $32.6 trillion over a 10-year period. Assuming both studies are correct, this would create an overwhelming financial burden on the federal government, requiring unprecedented tax hikes. Critics are also quick to liken Medicare-for-all to Medicaid rather than Medicare, claiming that if America is forced into a one-size-fits-all government program, patients will likely face long lines and delays in treatment. Moreover, the Mercatus study found that virtually any savings accrued from a single-payer plan would vanish if doctors and hospitals, who would be paid at least 10% less, wouldn’t agree to accept lower fees for patients who are now privately insured.

Healthcare reform is complicated, and the associated costs of Medicare for all have proven to be a stumbling block. Though Sanders’ plan is the most popular among Medicare-for-all advocates, he has yet to release a financing plan, so the potential impact on Americans and the healthcare industry as a whole is still uncertain.

How to Roll Over a 401(k) Plan When You Change Jobs

When you accept a new job with a new company, you need to decide what to do with the money in your 401(k) plan. Here are your options.

1. Leave the money in your former employer’s 401(k) plan

While this is typically an option, and your funds will continue to grow tax-deferred, it may not be the best option. For starters, once you move to your new place of employment, you’re no longer able to contribute to it. Another possible deterrent is the fact that your former employer could switch 401(k) providers or get bought out by a different company. Both scenarios would potentially leave you in the dark in regards to your account number or login information. However, if your new employer requires employees to work a certain length of time at the company before permitting them to partake in the 401(k) plan, leaving your 401(k) funds with your former employer temporarily might be a good game plan.

2. Roll your 401(k) to your new employer’s plan

If your new employer allows rollovers, you can have your 401(k) funds directly transferred to your new employer’s plan. This is called a “trustee-to-trustee” transfer: assets from one trustee or custodian of a retirement savings plan are transferred to the trustee or custodian of another retirement savings plan. By having your 401(k) funds directly transferred following federal rollover rules, you’ll avoid having federal income tax withheld, and your money will be easier to manage in one account. You can also have the funds transferred to a new or existing IRA.

3. Transfer your plan via an indirect rollover

Another possible alternative is to roll the funds over to another employer-sponsored retirement plan by having your 401(k) distribution check made out to you, and then depositing the funds to a new retirement savings plan. However, this particular move will require that 20 percent of the taxable portion of your distribution is withheld for federal income taxes. And if you wait beyond 60 days to redeposit the funds, the full amount of your distribution will be taxable.

Whichever way you choose to move forward with your 401(k) plan, you should be aware of rollover fees. Typically the fee is only a minimal one-time fee, but it’s worth checking in with your 401(k) provider to discuss this as well as any other questions you might have.