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Stop Stalling: Tax Extension Deadline Is Almost Here

By U.S. News & World Report

People scrambling to complete their taxes in April may have filed for a tax extension. This gave them a six-month buffer to get their forms in order. However, that six months will expire on Oct. 15, and the clock is ticking to turn in 2016 tax returns.

“The general problem is if you owe the government money,” says Ben Barzideh, wealth advisor at Piershale Financial Group in Crystal Lake, Illinois. “If you do owe money, that was owed on April 15.” Interest has been accruing on unpaid taxes since then. However, there will be additional penalties if a tardy taxpayer misses filing by the extension deadline as well.

[See: 10 Tax Breaks for People Over 50.]

File by Monday or pay a penalty. While the extension technically ends on Oct. 15, that day is a Sunday this year. As a result, taxpayers have until Monday, Oct. 16, to submit their forms. “This is the drop-dead deadline,” says Mitchell Baldridge, owner of Baldridge CPA in Houston. “If you miss the deadline on Monday, you’ll be subject to a late filing fee.”

The late filing fee tacks on a 5 percent penalty to unpaid taxes for every month the return is late, up to 25 percent. Taxpayers who wait 60 days will pay a minimum penalty equal to $205 or 100 percent of their unpaid taxes, whichever is less.

“I can’t emphasize enough that people file by Monday, even if they aren’t able to pay,” says Steven Elliott, tax technical director for Houston-based accounting firm MRZ LLP. Those who have lost tax forms, such as 1099s, can pay for a copy through the IRS transcript service if they aren’t able to get a duplicate from the issuer in time.

[See: How to Reduce Your Tax Bill by Saving for Retirement.]

Special considerations for disaster zones. Not everyone is bound by the October extension deadline though. “Here in Texas, we have hurricane relief,” Elliott says. That allows people in designated counties to push back their filing to as late as Jan. 31. People who live outside designated counties but use a tax preparer in the tax relief area also benefit from the extended filing period.

Tax relief has been approved in the wake of Hurricanes Harvey, Irma and Maria as well as other natural disasters. A complete list can be found on the IRS tax relief webpage.

However, even those who have the option of waiting should consider filing earlier if they are able. “[People] should file as soon as they can if they owe money,” says Eric Bronnenkant, head of tax for online investment firm Betterment. While those in disaster relief areas won’t get hit by a late filing penalty, interest on unpaid taxes will continue to compound.

[Read: Hurricane Harvey Victims Eligible for Emergency Retirement Withdrawals.]

Last-minute tax savings options. While there isn’t much time to act, there are still a few ways to save money on taxes. “Let’s say an individual did an [IRA] conversion,” Bronnenkant says. These conversions allow a person to transfer money from a traditional IRA to a Roth IRA, which offers tax-free withdrawals in retirement. However, income taxes are due on the converted amount.

If the IRA value has dropped since the conversion, taxpayers may want to switch their money back to a traditional IRA. Known as recharacterizing, this strategy can help people avoid paying taxes on investments that are now worth less than when they were converted. “You have until your filing deadline, including an extension, to make a recharacterization,” Bronnenkant says.

Another option for those with self-employment income in 2016 is to set up an SEP IRA. While the deadline to make contributions to a traditional or Roth IRA was in April, SEP IRA contributions can be made until the October filing deadline if someone has an extension.

Elliott says it’s a strategy some of his clients have used successfully. “They didn’t have an SEP before, and they set it up last week,” he says. After making their investments, the couple saved $14,000 on their tax bill. “They thought that was a pretty good thing,” Elliott says.

However, for most people, the time has passed to find tax savings. Instead, the focus should be on wrapping up the 2016 return quickly and then turning attention to the 2017 tax year filing. “No. 1 is you’ve got to get filed,” Baldridge says. “No. 2 is you have to get a plan in place so you’re not in this same [situation] next Oct. 15.”

A tax extension can be convenient, but it can also be costly once interest and penalties are added. Even if you don’t owe any money, procrastination can be expensive. After three years, the government will take whatever refund you have coming and leave you with nothing.

More from U.S. News

What to Do If You Owe the IRS But You Can’t Pay

3 Little-Known Retirement Savings Tax Breaks

5 New Taxes to Watch Out for in Retirement

Stop Stalling: Tax Extension Deadline Is Almost Here originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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