So, you’ve waited until almost the last second to file your tax returns? Hey, I’m right there with you. I pretty much always extend my return, and generally file at the last possible moment each 15th of October!
As the April 15 tax filing date draws closer, you may be like scores of other who find themselves somewhere between just about being finished and ready to go all the way to those who haven’t even started the process yet.
If you fall somewhere in that spectrum, I’d like to offer you some ideas and tips that may make things just a bit easier for you, help you minimize your tax burden and hopefully reduce the stress and associated risk of making costly mistakes that can occur especially when you are in a rush.
• Consider contributing to an IRA for last-minute tax savings. In some cases, it may make sense for you to contribute to a deductible IRA. Doing so can reduce your taxable income by as much as $5,000 per person (or $6,000 if you are 50 or older) and meet certain requirements. If you qualify, you have until April 15 to contribute to your IRA on behalf of last year and still take a deduction on your 2012 return.
• Don’t go it alone. Consider getting some help from a professional to help prepare and file the return, or if you are more the DIY can of person, you can try tax software that will ease and speed the process. A professional tax preparer, such as a CPA, can help you realize the full benefit of all the credits and deductions to which you are entitled, with savings that often more than pay for their fee. Plus, you have the assurance of know someone is there to stand behind the return with you.
• Double-check everything. If information is omitted or a mistake is made, the processing of the tax return as well as any associated refund could be delayed. Be sure you check that all Social Security numbers are listed correctly, including dependents. Also, if paper filing, be sure all required forms and schedules are attached, as well as all W-2’s and any 1099-R’s that have tax withholding shown. Finally, make sure you sign your tax returns, as unsigned returns will be returned to you.
• File the tax return electronically and use direct deposit. The combination of e-filing with direct deposit can mean receiving the tax refund in weeks (or even days) rather than the months it may take to get a refund check in the mail after filing a paper return. Also, electronically filed returns do not have to be manually input by the IRS or the State into their systems, so the risk of coding errors, a major cause of tax notices, is virtually eliminated by filing electronically.
Page 2 of 2 - • If you overpaid your 2012 taxes, adjust your 2013 withholding. You may like the idea of getting a refund each year, but a large refund just means you are overpaying your taxes throughout the year and basically giving the government an unnecessary interest free loan. Adjusting your withholding can mean keeping more money in your pocket now, and is a sound financial management practice.
Lastly, remember that if you just can’t get it done, you can always file for an extension of time to file (like I do) for up to six months. You do this by sending to the IRS Form 4868, and it’s automatic, no questions asked.
Don’t believe the myth that getting an extension somehow targets you for an audit; in fact, stats suggest just the opposite is true. Do, however, send payment if you think you are going to owe tax. An extension of time to file does NOT extend the due date for any payment due, so a good faith estimate of your tax liability is a must!
Any tax that remains unpaid will be subject to interest charges and a ½% per month late payment fee, although this year the IRS has said that the late payment fee may be waived if your tax return happens to contain one of the IRS forms whose release was delayed earlier this year due to the infamous New Years Day tax law change Congress and the President unloaded on us.
Lane Keeter, CPA is Office Managing Partner of the Heber Springs Office of EGP, PLLC, CPAs & Consultants