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January Tax-Preparation Tips for Early Birds

By U.S. News & World Report

Forget worms. When it comes to taxes, the early bird gets the largest refund (and the least stress).

While it’s tempting to procrastinate when it comes to filing your taxes, January is actually an ideal time to get a jump-start on the process, experts say. “History would suggest that the closer you get to the filing deadline, the more rushed you feel — [there’s] more pressure and more potential for errors,” says Glenn Brown, a senior tax research analyst of The Tax Institute at H&R Block in Kansas City. “If you want to maximize your return, you should file early.”

Consider taking these steps in January to get a head start on your taxes.

[See: Answers to 7 Burning Tax Questions.]

Decide how you’ll file. Take the start of the year to decide how you’ll file your taxes. Are you going to submit your tax forms electronically? Will you meet with a tax professional? “At least you know your course of action,” says Barbara Weltman, an attorney and contributor to “J.K. Lasser’s Your Income Tax 2017: For Preparing Your 2016 Tax Returns.”

Take note of what’s changed this year, says Jon Ulin, certified financial planner and managing principal of Ulin and Co. Wealth Management in Boca Raton, Florida. Did you buy or sell a house? Have a kid? Get married? Change bank accounts? Get an early look at what these milestones will mean for your taxes this year before the early-April crunch.

Call your tax preparer. If you’re choosing to enlist help from a tax professional, schedule your appointment early, experts say. “Don’t wait,” Weltman says. “Professionals get busy.”

Wait until late March or early April and your tax preparer’s calendar may be booked. Scheduling early will also buy you time if you need to schedule a follow-up meeting after you, say, show up without all the necessary paperwork.

Organize your paperwork. Take the relative calm of the first month of the year to get your paperwork in order, experts say.

Gather receipts, proof of charitable contributions and other tax forms in one place. Check your mailbox every day for essential forms. If you’re missing something that should have already arrived, use this time to reach out to the organization. Weltman recommends keeping everything in a single three-ring binder for easy access during filing season.

Boost your contributions. Eligible filers who submit their tax return early enough can use their refund to further reduce the previous year’s taxes. “You can make an IRA or health savings account contribution for 2016 up to the due date for the 2016 return, which is April 18,” Weltman says. “You have to file early enough or else the refund won’t come back in time.”

This is a savvy move, for example, for qualifying filers who haven’t reached their IRA limit of $5,500 (or $6,500 for investors who are 50 or older). “If you get your refund early enough, and you can input some cash into an IRA before the filing deadline, that does give you the ability to stretch out your investment there,” Brown says. The amount you’ll save depends on your income tax rate. For example, an eligible filer in the 25 percent bracket who invests $5,500 in an IRA for 2016 will reduce their tax bill by $1,375.

Make sure to tell the account custodian the year in which you plan to apply your refund, Weltman says. If you skip that step, he or she may earmark it for your 2017 contributions instead.

[See: 10 Smart Ways to Spend Your Tax Refund.]

Take note: The Internal Revenue Service won’t issue refunds for filers who claim the Earned Income Tax Credit or the Additional Child Tax Credit until Feb. 15, 2017 (and the refund won’t land in bank accounts until the week of Feb. 27). Still, the earlier you file, the more time you have to cash in on this strategy.

Think ahead. Taking care of 2016 taxes early will give you the time to start thinking about how you’ll tackle your 2017 taxes. You can use the first quarter to harvest tax losses, prepare your return for other uses, like applying for a mortgage, or adjust your withholding.

Says Weltman: “The sooner you get started, the less pressure or anxiety you’ll feel.”

More from U.S. News

8 Ways You Can Prepare Now for Next Year’s Taxes

9 Red Flags That Could Trigger a Tax Audit

A Checklist for Last-Minute Tax Filing

January Tax-Preparation Tips for Early Birds 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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