If you are trying to avoid overpaying the IRS and state taxes the last thing you want is to be charged late fees and penalties. You should file a tax extension if you plan on taking more time to gather and complete your tax return. However, you must pay the estimated taxes on the original IRS due to no matter what.
The IRS won’t charge interest on the tax you didn’t pay during the year if you:
- Paid at least 90% of this year’s tax liability.
- Paid 100% of last year’s tax liability (110% if you make more than $75,000 if you’re married and filing separately, or more than $150,000 if you use any other filing status).
- Owe less than $1,000 on your 2016 return.
The next step is to make sure that you have accounted for all possible deductions and credits. Start by using these last-minute ideas to cut your tax bill.
Use deferred savings plans
If you haven’t fully funded your company retirement plan, this is your last chance.
Fund a health savings account
Health savings accounts are a favorite tool of financial planners, as they’re the only true tax-free deductions. You can deduct contributions, and any gains are tax free if you withdraw them to pay qualified medical expenses.
Sell off losing positions
This is the best time to start selling losing financial positions. This may include stocks, bonds, mutual funds and exchange-traded
Donations and charity
By donating before the year ends, you could help a wonderful non-profit organization and cut your tax bill at the same time.
Deduct your medical expenses
The IRS allows taxpayers to deduct medical expenses that exceed 10% of their adjusted gross income.