Tax day tips: Eight things to check before April 17 tax deadline
Tax day comes a little later this year, but we're still in the homestretch. Here are some basics you need to follow before the federal tax deadline.
Taxpayers get a little longer to file this year, thanks to a quirky federal law that turns the District of Columbia's Emancipation Day holiday into a nationwide tax extension.
But the tax deadline will still come soon. Are you ready?
Here are some things to check or consider if you still have the good old "1040 Form" on your to-do list.
1. Can you hit the deadline?
If you're struggling to find the time, or have an unresolved question, you don't have to file your whole tax return on April 17. You can always file for an extension, giving you until mid-October. To do that, fill out form 4868 and mail it by April 17.
Or an electronic option for many filers is the "Free File" system on the IRS.gov website. (Free File should be visible under "hot topics" on the Internal Revenue Service home page. After clicking that link, look for "Can't make the April 17 deadline?" for guidance.)
2. If you owe money, get ready to pay.
Remember, whether you file your full return or an extension, the IRS wants you to pay any money you owe by the Tuesday deadline. (Make your best estimate if filing an extension.) Maybe that's an incentive to finish your taxes. There's still a weekend and a couple of days to go!
3. Do you have capital gains to be reported?
Gains on the sale of most assets are reported this year in a different way, on a new sheet called Form 8949. Then the numbers flow to the traditional Schedule D (and from there onto your Form 1040).
Check your documents, such as the statements mailed from your brokerage firm about sales of stocks or mutual funds, to make sure the original "cost basis" of an asset is what you expected.
4. Have you grabbed all the deductions and credits you can?
This can shave big bucks off your tax bill. In a separate story, we've listed lots of the available deductions, from mortgage interest and charitable gifts to college costs and state income taxes (or, alternatively, state sales taxes).
5. Have you contributed to an IRA if you can?
Individual Retirement Arrangements offer big long-term tax benefits as a way to save for retirement. You can still put money in, for 2011, up until April 17.
If it's a traditional IRA, your immediate deduction can be as high as $5,000 in contributions, or $6,000 if you're over age 50. If it's a Roth IRA, you don't get a deduction now, but the money will be untaxed when you withdraw during retirement.
With either type, income-based eligibility rules apply. And with both kinds, the money grows tax free between when you kick it in and when you withdraw.
6. If you seek last-minute help, be careful.
Sometimes tax preparers have little training or are unscrupulous. The IRS is moving to make them pass an exam by the end of 2013, alongside licensing or credentials now required of tax attorneys, certified public accountants, and enrolled agents.
The Massachusetts Society of Enrolled Agents offers some ideas to safeguard yourself: You can check if a preparer has black marks with the Better Business Bureau, avoid preparers who charge a percentage of your refurn as a fee, never sign a blank return and give it to a preparer, and make sure the preparer signs the form and includes his or her tax identification number, called a PTIN.
Whoever helps you, make sure you review your return before signing it.
7. If you can't pay, you still have some options.
If you can't immediately pay what you owe, the financial information firm CCH offers some ideas about what you can do. First, if you've been unemployed or suffered at least a 25 percent downturn in self-employment income due to the economy, you may be able to get penalty relief by filling out Form 1127A under what the IRS calls its "fresh start" initiative.
Second, taxpayers who can pay the full amount within 120 days can ask the IRS for a short-term administrative extension.
Third, taxpayers may be able to pay by getting a loan or using a credit card. The cost "may be lower than the interest and penalties assessed by the IRS," CCH says. The firm adds that credit card payments must be made electronically, through personal tax software, through a paid tax preparer, or through credit card service payment providers.
A fourth option is to enter an installment agreement. The IRS must accept installment payments if a taxpayer has a good track record over the past five years, the amount owed is no more than $10,000, and the amount can be paid off within three years.
8. Don't forget the simple stuff.
Take a final glance at your math. Check that you've listed all your income. (If you have foreign financial assets, you may have to file the new Form 8938.)
Remember to sign your form, attach a W-2, and enclose a check if needed. Keep a copy for your own records. Your tax software may allow you to make a PDF copy, with password protection for privacy.
Save your tax-related financial records. As long as your return isn't fraudulent, the IRS says you don't have to save records beyond seven years from filing.