Don't delay: Read these tips for tax procrastinators
April 9, 2014
WEST LAFAYETTE, Ind. — Jason Stanfield, a lecturer in accounting at Purdue University's Krannert School of Management and a CPA, offers some last-minute tips for those who still haven't filed their 2013 taxes.
Time may be working against you, but errors are the enemy. It’s easy to make mistakes when you're brushing up against the April 15 deadline, Stanfield says. Here are some ways to help ensure your return is in tip-top shape:
* If you’re not using a professional, consider using an online service or software product. These will catch and prevent simple problems, such as inputting an invalid Social Security number, calculation errors and failing to attach a completed form. Many commercial products are available for individuals and for taxpayers with low and moderate incomes. FreeFile, available at http://www.irs.gov, guides taxpayers through preparing federal and many state tax returns at no charge.
* Before preparing and submitting your 2013 tax return, review your return for 2012. Looking at how various items were treated on your return in prior years can jog your memory and help in preparing this year’s return.
* Stop the procrastination. You’re already down to preparing your tax return in the week it’s due, but that doesn’t mean you have to submit it the day it’s due. Leave yourself time for any questions that you might need to get answered.
Don’t let the pressure make you leave money on the table. When trying to beat a deadline, taxpayers often fail to claim all the tax benefits to which they’re entitled, Stanfield says. Here are a few key things to remember:
* Just because you’re not itemizing doesn’t mean you have no deductions. Some, such as those for IRA contributions, tuition, student loan interest, and moving expenses are “above-the-line” deductions, meaning they are taken before arriving at your adjusted gross income, or AGI, subtotal.
* Even if you have no federal tax liability, some tax credits can still help you. The child tax credit, American Opportunity education credit and the earned income credit are partially or fully refundable, meaning part of the credit will still be paid to you even if you had no tax liability for the year.
It’s OK to ask for an extension. What’s not OK is to not pay the bill. Generally, if a taxpayer has paid at least 90 percent of this year’s tax bill, or an amount equal to last year’s tax bill, by the April 15 deadline, a six-month extension is automatically granted, and no failure-to-file penalties will apply as long as you file Form 4868 by the deadline, Stanfield says.
However, you’ll still owe interest, currently 3 percent, on the amount that wasn’t paid by the deadline. Requesting an extension is so easy that you might think it’s not important, but the penalties for failure to file without an extension are steep: 5 percent of the unpaid balance, per month, up to a maximum 25 percent penalty.
Let’s not do this again. Many taxpayers procrastinate because they expect to owe. Rather than repeating the past, try to minimize next year’s tax pain by planning ahead, Stanfield says. A tax professional can help to estimate the current year’s tax bill based on current and projected income, deductions, and credits. Taxpayers also can find calculators at http://www.irs.gov and many commercial product sites to help calculate how to complete a W-4 for employers to have the correct amounts withheld and how to estimate tax payments that should be made. They also can provide a projected refund or amount owed for your 2014 return.
A video of Stanfield discussing last-minute filing is available at https://www.youtube.com/watch?v=972aHIkCfTM&feature=youtu.be
Writer: Judith Barra Austin, 765-494-2432, firstname.lastname@example.orgSource: Jason Stanfield, 765-494-9140, email@example.com