Almost Tax Day

Good morning and Happy Tuesday. We’re less than a week out from Tax Day so here’s a grab bag of things to remember if you’re like me and your completed return has been ready and waiting for signature and mailing longer than I care to admit.

Funding an IRA for last year –

You can fund an IRA up until close of business this coming Monday, the 15^th.

The practical deadline for electronic funding from an outside bank is this Thursday but midday Friday, the 12^th would be the last day since an overnight transfer is required.

If you have to wait until the 15^th to fund your IRA, a good option is to walk a paper check into a Schwab branch (assuming that’s where your account is) and have them deposit it for you. Get a receipt showing the deposit date just in case there’s a question later.

However, Schwab will let you do a mobile deposit up until 4pm local time on the 15^th, so that’s a great option if you can leverage technology.

Technically you can put a check in the mail and have it postmarked by the 15^th and be fine but let that be your last resort. Make the check payable to the custodian and write “2023 IRA Contribution” on the memo line. You could also add in “FBO (your name)” just to make it crystal clear.

Clients often ask about Form 5498. This form shows deposits into an IRA and shows up after tax season. 5498’s are typically sent late-April through mid-May and, consequently, aren’t required to file your tax return. Just keep it for your records or, more likely, let the custodian keep it for you until needed. Also, 5498’s aren’t generated for employer sponsored plans since custodians don’t keep track of deposit timing like they do for IRAs. The assumption is that you and/or your tax person are doing so related to your business tax return.

Paying your taxes –

I think most people mail in paper checks to pay their taxes. This is how I do it and it’s more out of habit than anything, especially since I pay electronically for almost everything else. Your tax person or your tax software should provide a slip with the relevant information to include with your check to the Feds and the State.

That said, you can pay your federal taxes via the IRS’s Electronic Federal Tax Payment Service or DirectPay for free and processing time is about one day.

You can also pay federal taxes via credit or debit card, but fees apply. Here’s an IRS link to see the different vendors and their fees.

https://www.irs.gov/payments/pay-your-taxes-by-debit-or-credit-card

And you can pay via wire transfer. Schwab has an electronic tool for setting up domestic wires and it’s free. Otherwise, banks typically charge around $25 for a wire transfer. Timing on this could be same-day if the wire request is received in good order by maybe 1-2pm EST. Still, I would plan to send a wire by this Friday just to be safe. The IRS has a worksheet with the wire details that you can find on irs.gov. 

Wires are straightforward so long as you slow down a bit and check everything multiple times. I say this because wire instructions are easy to get wrong and the exchange of this information, often via email, makes wires susceptible to fraud. Someone could gain access to your email and insert their own wire instructions without you knowing. It’s primarily for this reason that a bank’s wire department asks if you personally verbally verified the wire instructions prior to submitting the wire. Please don’t ignore or be overly casual about this step. Wires are great for sending money but are almost impossible to get back if something goes haywire.

Along these lines, tax-time is a golden opportunity for fraudsters or even just shady companies looking to take advantage of people. One of the ways they get you is by creating fake, or “spoofed”, websites and emails that look legitimate. However, there are some ways to spot fake or otherwise shady sites.

Look at the URL at the top of your web browser screen. Are there misspellings in the company name or anything else that seems out of place. Does the website look okay but you notice spelling or grammatical errors? If so, don’t click on anything, close your web browser, and start over.

It’s also a good practice not to search for websites via Google. Instead, bookmark your bank’s website, for example, to limit your exposure to potential fakes that bubble up in a web search.

The same basic gist applies to emails. Look at the sender’s address. You may have to hover your curser over it or tap the name if you’re on your phone. Is it spelled correctly? Does it look accurate? If anything looks strange, stop, don’t click anything, and reach out to the sender to ask if the email is legitimate.

Also beware of any website or email pushing you to act quickly. Granted, tax filing comes with deadlines but your personal fraud radar should ping anytime you’re feeling pressured to click a link or provide your personal and account information to a third party.

Remember: When in doubt about this sort of stuff it’s best to slow down or stop entirely. Call your bank to verify using information derived from another source, such as a bank’s customer service number obtained from Google. If it’s from Schwab or from me, call me and ask. By the way, I’m not suggesting that you fear everything, just be more aware, especially during tax-time. These days a little paranoia goes along way.

Have questions? Ask us. We can help.