Your Emergency Tax Guide
There’s only about two weeks left until your taxes are due and… you haven’t even started them. You’re panicking. Taxes are confusing and stressful and if you don’t fill them out correctly, the government will send an entire police unit to your house to have you hauled off in chains (you assume).
Well stop panicking. You’ve got this. Just smash the glass marked “break in case of tax emergency” and grab the OppLoans Emergency Tax Guide. We spoke to tax experts to get the answers to many of the most common tax questions so you don’t have to scramble to get those returns filed away.
But I lost important tax documents!
It’s tough to keep track of all the tax forms you receive. Each form name is a jumble of letters and numbers, that sounds like some kind of Star Wars robot. Seriously, wasn’t W-2 friends with C-3PO? No one could blame you for losing your tax documents, especially from previous years. But how do you get them back?
Alexis M. Kimbrough, an accountant with the Growth Group (@GrowthGroup), told us what to do if you lose a tax form: “To retrieve all of the information that the Internal Revenue Service (IRS) has about your tax account, you can request a Wage and Income Transcript online or have it mailed to you by the IRS. If you’re purchasing a home or needing your income tax returns from previous years and can’t find them you can request a tax transcript from the IRS here.”
What about all this health insurance stuff?
You know you have to deal with health insurance stuff, but you’re not quite sure exactly what you have to do. You remember hearing something about a mandate which is part of the ACA which is the same thing as Obamacare, which you heard might be repealed but then it wasn’t… can’t someone just tell you how this factors into your tax returns?
Yes, someone can. And that someone is Hector De La Torre, executive director of the Transamerica Center for Health Studies (@TCHS): “Individuals who need to make a shared responsibility payment because they were without health insurance for at least nine months in 2016, should complete form 8965 (Health Coverage Exemptions) to calculate their amount due and report it on line 61 of form 1040 in the “Other Taxes” section, and on the corresponding lines of forms 1040A (line 38) and 1040EZ (line 11).”
And if you got insurance through the ACA marketplace? “Taxpayers who enrolled in individual health coverage through the marketplace/exchange Healthcare.gov need to submit form 1095-A (Health Insurance Marketplace Statement) with their federal income tax return to acknowledge their health care coverage enrollment. Those who received a monthly premium discount based on their income must file to reconcile any advance payment made on their behalf. Those taxpayers with coverage through Healthcare.gov may also qualify for a premium tax credit if they did not receive a monthly premium discount on their policy and must file a return to claim the credit,” De La Torre told us.
Finally, De La Torre says for anyone that gets their health insurance through their employer they “should receive a form 1095-B with the details of their insurance filled out so they can prepare their IRS tax return. While taxpayers are not required to send the IRS proof of health care coverage when filing their return, it is advised by the IRS to keep those records to verify coverage.”
What purchases can I deduct from my taxable income?
According to Kimbrough, you can deduct “products and services that are typically required in your industry to be successful in business.” And you can think pretty expansively about what is required in your business. Growth Group specializes in helping musicians with their finances, so they have a list of 100 different deductions that musicians can take. Most of those deductions aren’t music specific, so take a look at the list for a quick deduction lesson you can apply to your taxes right now! Just be sure you’ve kept the receipts or have credit card or debit card statements as proof of your purchases.
And don’t forget, if you were charitable last year, those gifts are also deductible.
Quick, tell me who counts as a dependent!
Claiming dependents, if you have them, is a great way to get even more deductions on your taxes. So who counts as a dependent? Is your kid’s friend Sam who practically lives with you a dependent? What about your neighbor who borrows your lawnmower every single week? Surely your dog is a dependent!
Kimbrough cleared that up for us too: “Generally you can claim a person who is a qualifying child or relative of yours. Your qualifying child would be your child, including foster children, adopted children, grandchildren, or siblings who are under 19 or full-time students under age 24, or any age if they’re permanently disabled. This child needs to have lived with you more than half the year and you should support them financially. A qualifying relative would be anyone who lived with you the full year as part of your household and their income must be less than the limits (for 2016 they can’t make more than $4,050). Again, you must support this person financially.”
Can’t I just get a robot to do this?
Kind of! There’s a lot of tax software you can purchase. TurboTax is one of the most common standards, and if you can afford it, you can purchase it online for around $70 from Intuit’s website.
If your adjusted gross income was less than $64,000 for last year, however, there are multiple software offers you may be able to take advantage of for free. You can find out if you qualify for free tax prep software on the IRS website.
This is great tax advice but I still don’t think I’m gonna get my taxes done in time!
“If you need more time to file your tax return, you can get an extension which will give you an additional six months to file,” says Kimbrough. You can find the form to request an extension at IRS.gov.
Be aware, however, that an extension on filing your taxes IS NOT an extension on paying your taxes. You’ll still need to estimate about what you think you will owe and pay that on time or else you can be hit with fines. Better to overestimate and get that money back after you file than underestimate and get fined for it.
Take a deep breath, you got this!
It’s easy to procrastinate filing your taxes, but you have to do it eventually. And you should do it right now. Just take a few hours, use the advice we’ve offered and just get those taxes filed (read more in Tax Season 101: An OppLoans Explainer eBook). You’ll be so glad you did, and then you can get a jump on procrastinating for next year’s returns.
Hector De La Torre, is the Executive Director of the Transamerica Center for Health Studies, a nonprofit focused on helping consumers and businesses navigate the health care landscape. De La Torre was chosen to lead this new initiative because of his private and public sector experience, particularly his leadership role on health care and advocating for consumers and businesses. Among his accomplishments as an elected official were expanding access to doctors in underserved communities, consumer protections against retroactive cancellation of health insurance, and supporting facilities improvements at Children’s Hospitals.
Alexis Kimbrough, CPA, believes without the contributions of music creators, the world would be boring. As the founder of Growth Group, Alexis specializes in helping music businesses be profitable and musicians to live prosperous financial lives. Since 2008, Growth Group delivers financial education, tax, accounting, and bookkeeping services for independent artists, record label, and recording studios. Learn more about Alexis and Growth Group here: GrowthGroup.com
The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.