Baseball has returned and it looks like life will be possible again, so all is right with the world, eh?
Yes — unless you're rushing to file your federal income taxes by Friday's deadline. In that case, your stomach is doing somersaults as you try to make heads or tails of the opaque, long-winded instructions written in a bureaucrat's native language. Worse, you can't find that needed scrap of paper as you paw through deftly numbered shoeboxes stuffed with receipts.
“The bottom line is that if you're not ready and don't feel comfortable with your tax return as it stands, don't send it in on April 15,” says Martin Nissenbaum, national director of personal income tax planning for Ernst & Young in New York. “You can always get an extension to August 15.”
You can get an automatic four-month extension by using IRS e-file, by filing a Form 4868 or by phone at 1-888-796-1074.
But here's where things can get sticky.
The Internal Revenue Service requires that the tax liability shown on Form 4868 be properly estimated and based on the best information available to the taxpayer for the extension to be valid. In addition, unless 90 percent of the taxpayer's liability is paid before the original due date through withholding and estimated payments, a late penalty of 0.5 percent per month will be assessed, plus the regular interest on underpayments.
Here are seven basic tips for those who file at the last minute:
- You can download forms and publications from the IRS Web site or call the IRS at 1-800-TAX-FORM. Forms are also available at local IRS offices. In addition, many banks, post offices and public libraries stock common forms.
- The IRS says common errors include forgetting to include your W-2 with your tax return, forgetting to sign your return, placing the federal return in the state envelope (and vice versa) and failing to provide — or providing an incorrect — Social Security number for yourself, spouse or dependents.
- Commonly overlooked deductions include the Hope Scholarship credit and Lifetime Learning credits, generally worth at least $1,500 per family. Don't forget deductions for student loan interest, health insurance premiums for self-employed taxpayers, higher education expenses, adoption and child credits.
- Double-check your math. Make sure your return reflects the amounts shown on Forms W-2 (wages), 1098 (mortgage interest) and, if needed, 1099 (non-employee compensation such as interest and dividends). If not, attach an explanation.
- If you're filing your return by mail at the last minute, use certified mail or a private delivery service that provides proof of delivery. Consider e-filing next year.
- Don't forget the Alternative Minimum Tax. Complete Form 6251 whether or not you're subject to the AMT. Otherwise, if you are in the AMT, the IRS will do it for you and you may be hit with penalties and interest.
- If you haven't already done so, fund your Individual Retirement Account, regular or Roth, no later than April 15.
So why do people put off the inevitable and file just before the last ding-dong of doom?
“If you have a balance due, it makes no sense to file and pay early,” Nissenbaum says. “For others, it's just a matter of putting off an unpleasant task as long as possible.”
Procrastinators of the world, unite!