October is one of my favorite months, as it ushers in crisp, cooler temperatures. This time of year has two names, fall and autumn.
October also is a key month for some important tax moves. And there are many names for taxes, too, although not all printable in the ol’ blog.
I know it’s tempting to rant about taxes instead of thinking about or actually acting on the, especially this time of year. I, too, want to be outside enjoying the arrival of fall. But first I have to take care of a couple of tax tasks.
Here are four October Tax Moves that you also might need to consider.
1. File your extended 1040 You and around 10 million other taxpayers made a good move back in April in getting six more month to file your tax returns. It’s always better to take extra time and do it right.
But now you’re heading into the same panic situation. Don’t. Get to work on your tax return now so that you’re not freaking out on Oct. 17. Yes, the 17th. The regular Oct. 15 deadline is on a Saturday this year, so you have two extra days. Don’t waste them!
If you miss this ultimate filing deadline, the Internal Revenue Service will start assessing late- or non-filing penalties based on any tax that you didn’t pay when you got your extension.
The Weekly Tax Tips that have running since mid-April, as well as the Daily Tax Tips posted during the main filing season (check the end of the January tax tips page for links to the other months’ tips) can help you finish this job.
If your adjusted gross income is $62,000 or less, you can still use Free File to send in your tax return.
And don’t forget about your state tax returns. If you got extra time to file your federal paperwork, it’s likely that your state extended taxes also are due Oct. 17. Don’t miss that deadline either.
2. Contribute to retirement accountsIf you’re self-employed and got a filing extension, that also extended the time you have to put money into a retirement account you set up for your own business.
Confession time: the retirement extension is the main reason I generally ask for six more months to submit my 1040. It gives me more time to come up with the money to max out my own self-employed retirement plan account.
Not only is it worth doing for a more enjoyable retirement, your self-employment retirement plan contribution is an above-the-line deduction. I don’t know about you, but I’ll always opt for adding dollars to one of my accounts instead of giving it to Uncle Sam.
I have a SEP, or Simplified Employee Pension, specifically a SEP-IRA. If you’re self-employed and got a filing extension, you can still open a SEP and contribute to it by Oct. 17. If you already have one or perhaps a Keogh, also known as an H.R. 10 plan that you put in place by the previous Dec. 31 deadline, you can contribute to them by Oct. 17, too.
And if you work for someone else and have a 401(k) plan at that job and/or an individual IRA, either traditional or Roth, think about putting more money into those retirement savings vehicles, too.
The added money won’t affect your 2015 return even if you put it in by Oct. 17. Instead, it will count for the 2016 tax year. But putting some into these plans every time you have a few spare bucks is a good way to boost your growing retirement savings.
3. Recharacterize your Roth IRA conversionOK, if it seems like I’m stuck on retirement, it’s because I am. Part of that fixation is because October is also home to the deadline to recharacterize that Roth IRA that you earlier in the year converted from your traditional IRA.
This do-over is allowed every year by Oct. 15, or Oct. 17 this year.
A common reason to reverse a Roth conversion is because the retirement account lost money since the change. In that case, even though the Roth is now worth less, you still owe income tax on the converted amount.
The only way to get out of that conversion tax bill is to recharacterize the account by the October deadline.
4. Review your flexible spending accountFor most companies, fall is open season for employee benefits. That generally means selecting medical and other health-related coverage.
Some workplaces also offer flexible spending accounts, or FSAs, both for child care and medical expenses. While you’re looking into those options for 2017, also examine your current medical FSA.
Does it still have a substantial sum in it? Now’s the time to think about how you’re going to spend that pre-tax cash.
While the IRS has loosened rules in recent years making it easier to carry $500 of a medical FSA balance into the next year or giving you a grace period until March 15 of the following year to spend what’s in the account, the bottom line is you still need to keep an eye on this money so that you don’t waste a dime of it.
So look at your and your covered family members’ medical needs and schedule those FSA-eligible treatments now. If you wait until November or December to make those appointments, you might find your doctor or treatment facilities already booked through the year. And in that case, you run the risk of wasting your FSA balance.
More tax moves for the rest of the month: These are just four tax things to think about this October, and in three instances, by no later than Oct. 17.
But there are other tax moves to make throughout this month.
You also can adjust your withholding, get ready for the lingering hurricane season and, if you itemize, set up a bunching strategy.
You can find more about these and other October Tax Moves under the heading of the same name (and red type color) over in the ol’ blog’s right column. Check the tips out in the coming days to see if some of the tax actions will save you some tax dollars and/or grief.
Today, though, take advantage of the fall or autumn (your name choice) weather and get outside to enjoy this season.
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4 (and more) tax moves to make this October