7 tips to tax prep April 18 tax-filing deadline

By Andrew Housser

This year, a federal holiday pushes the usual tax filing date to April 18. Put those extra three days of preparation to good

use by making sure you have all your tax information in order. These seven tips can help you breathe a little easier if you 

are worried about taxes. For those dealing with significant debt – whether looming tax debt or other debt they have 

accumulated – the tips may be especially helpful.

1. Do not skip tax filing. Even if you worry that your tax bill will be too much to pay, file a return or an extension. The 

penalty for filing late is much more than the penalty for paying late. The IRS permits filers to file one extension, 

which lets you file your return by Oct. 15. You still are expected to pay at least 90 percent of the tax due on April 18. 

If you cannot pay it then, the half-percent penalty for paying late is far less than the 5 percent penalty for filing late. 

Filing more than 60 days late without filing an extension incurs a 100 percent penalty. That doubled your tax bill.

2. Do not fall for scams. Several phone and Internet scams are trying to take advantage of people who owe taxes. 

Understand that the IRS will never call or email you as a first step. The IRS always communicates first by postal mail. 

Find out more about avoiding tax scams.

3. Understand impact of forgiven debt. This year brings good news for some taxpayers with respect to forgiven 

mortgage debt. For 2015 and 2016, the tax bill passed in December temporarily excludes forgiven mortgage debt from 

taxable income. That is a huge relief for taxpayers who sold their home for less than it was worth or went through a 

foreclosure. For forgiven debts other than mortgage debt, the forgiven portion is still considered taxable income by 

the IRS. However, there are rules that allow people who are deemed insolvent to avoid paying tax on that income. It 

would be wise to discuss with a tax advisor if you are in this situation.

4. Use caution when borrowing money to pay a tax bill. If you owe a significant amount of taxes, you might be 

tempted to borrow money to pay the bill quickly. But bear in mind that loans from paycheck lenders and other quick-

turnaround lenders can come with sky-high interest rates. These high rates make the loan far more expensive – and 

risk putting you even deeper in debt. Instead, look into a loan from a bank, credit union or reputable online lender, if 

you must borrow to pay taxes. And never borrow more than you can afford to repay on the set payment plan.

5. Be aware of changes to tax laws. Some changes to tax laws may be favorable to some filers. The tax bill passed in 

December made permanent the credits for education, commuter expenses, and classroom supplies teachers buy for 

their classrooms. The bill also raised the Earned Income Credit for lower-earning working families that have three or 

more children, to a maximum of 45 percent of household income, from the previous 40 percent. The bill also extended 

the law that makes mortgage insurance premiums tax deductible for two more years.

6. Watch for health insurance coverage penalties. If you did not have health insurance coverage for all of 2015, you 

will owe a penalty. For 2015, the penalty is the higher of (a) 2 percent of household income or a maximum of the total 

yearly premium for a Bronze-level plan, or (b) $325 per adult and $162.50 per child under 18, to a maximum of $975. 

Watch for this line on your tax return and calculate it carefully. If you still do not have coverage, unfortunately, it is 

too late to get coverage for 2016 unless you have a qualifying event. If you get married, lose your insurance, have a 

child or move to an area outside your coverage area, you may still be able to sign up for coverage this year.

7. Prioritize what you pay. If you are struggling with debt on a month-to-month basis, and find you will also owe taxes, 

you must set payment priorities. First on the list should be basic food, clothing and shelter. Always pay the minimum 

on secured debts – those secured by a tangible asset, such as a car or a home. If you do not pay these bills on time, 

you could lose the asset. Second, pay your taxes. The government can garnish wages or send you to jail for not paying 

your bills. Third, pay your other creditors. If you need help to pay what you owe, consider seeking assistance from a 

reputable debt relief firm.

Tax season can be less stressful if you plan ahead. Do not wait until the last minute to gather your information. Use what 

you learn in your tax preparation to make any necessary changes. Adjust withholding if you need to, or work to repay debt 

in 2016 so you will be in a better position a year from now.

Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.