Procrastinators of the world, unite! You have nothing to lose but your sanity between now and the tax filing deadline.
This year's drop-dead date is Monday, April 17, because April 15, the traditional deadline for filing federal and state income taxes, falls on a Saturday. (See "Taxes 2006.")
"Late filers are prone to making basic computational errors and overlooking deductions," says Greg Rosica, a tax partner with Ernst & Young in Tampa, Fla. "Even if you know of the deduction, you may not have time to gather the supporting material to claim it. So, if you're rushed this year, think about what you can better control next year."
You can secure an automatic six-month extension with the Internal Revenue Service by booting up your Dell, Hewlett-Packard or Apple computer and submitting IRS Form 4868 online. You can also lick a postage stamp and do it the old fashioned way. But filing the form doesn't mean you can practice your toe-wiggling until fall.
The IRS requires that the tax liability shown on Form 4868 be properly estimated and based on the best information available to the taxpayer. In addition, unless 90 percent of the taxpayer's liability is paid by the standard deadline through withholding or estimated payments, a late penalty of 0.5 percent per month will be assessed, plus interest on underpayments. So, you get an extension to file — not to pay your tax liability.
If you have a balance due, there's no reason to file early. But if you're getting a refund, you've let Uncle Sam have your money interest-free a little longer and you should think about adjusting your withholding to keep more of your income in your pocket. So far this year, the average refund is $2,704, up from $2,614 last year. (See "Withholding.")
Here are seven basic tips for those who file at the last minute:
- You can download forms and publications from the IRS Web site. Forms are also available at IRS offices as well as many banks, post offices and public libraries.
- 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 student loan interest, health insurance premiums for self-employed taxpayers, higher education expenses and 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. Those who file electronically and elect to have their refunds deposited directly in a checking or savings account generally receive their money in about half the time it takes to receive a refund when filing by mail. However, taxpayers who use paper returns also can choose direct deposit and generally get their refunds about a week sooner than waiting for a check to arrive in the mail.
- If you haven't already done so, fund your Individual Retirement Account no later than April 17.
The IRS estimates that in calendar year 2001, the most recent year for which statistics are available, 13.6 million people didn't file their required tax forms. There's no way of knowing if they're "tax resisters" who challenge the legality of the income tax or just "forgetful," like the local politician who blathers endlessly on the need to fund his pet projects while neglecting to pay his own taxes. What's known is that the IRS processed about 130 million individual 1040 forms in 2001, and those who didn't file owed Uncle Sam an estimated $27 billion.
Tax preparation is an unpleasant, mind-numbing task, but like housework, it's got to be done. And time is running short.
However, the deadline will be April 18 for taxpayers in the District of Columbia, Maine, Maryland, Massachusetts, New Hampire, New York and Vermont, because the processing center in Andover, Mass., will observe Patriot's Day.
Once you're done, don't get too relaxed, because the opaque, long-winded instructions written in a bureaucrat's native language will be back next year, and you can paw through your receipts in deftly numbered shoe boxes all over again.