Last minute help for balance-due returns

The tax deadline for 2016 returns is fast approaching.  You may have already prepared your returns and found you have an unexpected balance due, or maybe you are hiding and waiting until the last minute because you are afraid you might.  In either case, you may have options to wrestle with those taxes.

Retirement Plan Contributions:  You still have time to contribute to your IRA or SEP and take the deduction on your 2016 return.  Deposits made before the filing date of April 18 and designated as 2016 contributions, can be deducted retroactively.  The limits on IRA are $5,500 or $6,500 if you are over age 50.  A SEP, or Simplified Employee Pension, is for businesses and has a much higher limit than IRA, up to 25% of compensation to a maximum of $54,000.  This can take a very large chunk out of that tax liability for self-employeds.

Missed Deductions:  Did you find additional deductions after completing your return?  These can still be claimed.  One thing I always suggest to clients who find themselves with a balance due is to go back and see what they may have missed.  Take another look at business, medical and charity mileage to be sure you captured everything.  Recalculate non-cash charitable donations to be sure you did not under-estimate the value (check out http://salvationarmysouth.org/valueguide-htm/, you will be surprised how much you can deduct).

Payment Options:  If you have exhausted your tax-reduction options and still find yourself with a balance due, you have options for payment.  IRS accepts credit cards.  There is about a 2% fee for this, but it can still be a welcome option for some.  You can also apply for an installment agreement with IRS.  Most taxpayers qualify for an automatic approval to make payments over 72 months.  There is an application fee and interest, and IRS will keep any future refunds to apply to your balance.  For either of these options, you can go to IRS.gov and search for the option you want or use the IRS2Go mobile app. 

Extensions:  Contrary to popular belief, filing an extension does NOT extend the time to pay your taxes.  When you apply for an extension of time to file your return, you must estimate and pay the tax due with the extension. 

If you have already filed and want to avail yourself of one of the above options, it is not too late.  You can file an amended return to make the appropriate changes and pay the corrected balance due.  If you have already e-filed and chose payment by direct debit, the original balance will still come out, but you will get a refund with your amended return.  If you need to use a payment option, you should do so as soon as you can and pay as much of the balance before the deadline to reduce penalties and interest.  A balance-due tax return is never fun, but hopefully these suggestions can make it a bit easier.  Stay calm and carry on!