9 last-minute tax tips
Haven't filed your taxes yet? You've got plenty of company. Before you get going, start with this checklist.
This post comes from Angela Colley at partner site Money Talks News.
The last day to file your taxes is April 15. If you've waited until the home stretch, you're not alone. The IRS told the Lubbock Avalanche-Journal that 20% to 25% of Americans wait until the last two weeks to file their return.
That's not hard to imagine. After all, if you're getting a refund, you file as soon as you get a W-2. If you owe, you wait till the last minute. No point paying the bill before it's due.
Then, of course, there are also those of us who procrastinate. If it's time for you to get started, here's some last-minute advice that might help.
1. Contribute to an IRA
One of the few ways you can still lower your 2012 tax bill is by contributing to a tax-deductible IRA. You have until April 15 to do so. Contributing has big benefits: a tax deduction, tax-deferred compounding, and the main benefit -- survival when you're retired.
The IRS says the maximum you can contribute for 2012 is $5,000 ($6,000 if you're 50 or older).
2. Get organized
I once spent three days on the floor of my living room sorting through a box of crumpled Home Depot receipts because I hadn't gotten organized before I started my taxes. Don't make my mistake. Get what you need before you sit down, including:
- W-2s from your employers.
- 1099-MISC if you're self-employed.
- 1099-SSA for Social Security benefits.
- 1099-INT and DIV forms for interest and investments.
- 1099-G for state unemployment benefits or state tax refunds.
- 1098-T for college tuition paid.
- Summary of paid real estate taxes.
- Summary of paid health care costs.
- Summary of child care expenses.
- Receipts to back up potential deductions.
3. Decide if you'll get help
Before you spend hours struggling with tax forms, decide if you want to DIY or get help. If you made $51,000 or less last year, you can get free tax help from the IRS VITA program. If you're 60 or older, you might find free help through the Tax Counseling for the Elderly program.
If you don't qualify for either, you can pick up cheap or free software by checking out vendors on the IRS Free File website.
4. Slow and steady wins the race
Some people thrive on deadlines. Others feel rushed and end up overlooking deductions or making mistakes. If you're more the rushed type, slow down. Mistakes on taxes can be costly: Enter the wrong information and you could end up paying more than you should, or not getting back all you could. When you're done, double-check your return before you file.
5. Don't rush past deductions
Don't feel tempted to take the standard deduction to save time. Hunt down itemized deductions and see if they'd save you more. Here are the standard deductions for 2012:
- Standard deduction for single taxpayers -- $5,950.
- Standard deduction for married taxpayers filing a joint return -- $11,900.
- Standard deduction for head of household taxpayers -- $8,700.
Here are some common deductible expenses you might use to exceed the standard deduction:
- Charitable donations.
- Home mortgage interest and real estate taxes.
- Higher education expenses.
- State and local income taxes.
- Medical expenses (but only what exceeds 7.5% of your adjusted gross income).
- State and local sales taxes.
- Job-hunting expenses.
- Points paid to refinance a mortgage.
6. Go digital
However you choose to do your taxes, be sure to efile and request direct deposit. If you request direct deposit, the IRS says you'll get your refund in less than 21 days and you can track the status online. And if you have to pay, you can also pay electronically.
Everyone can file their tax return electronically free through Free File.
7. Prepare for the worst
If you didn't cheat or make a big mistake, odds are you won't be audited. But play it safe and make sure you have everything you need if you do get the dreaded IRS letter. Start a file for your 2012 tax return and store anything you might need:
- Copies of your filed forms.
- Statements backing up the deductions you took.
- Copies of receipts.
8. Get an extension
If you're getting a refund, you don't have to file an extension, or file by April 15. You have three years to file; otherwise, you forfeit your refund.
But if you do owe and can't get your taxes done by April 15, file an extension. That will buy you another six months, so your return won't be due until Oct. 15.Important: Extensions extend your time to file, not pay. If you're going to owe, estimate your taxes and send in a check with your extension by April 15.
And if you owe and can't pay? Send in your form or extension anyway. You'll be penalized: The failure-to-pay penalty is 0.5% of what you owe for every month it's not paid, with no time limit. So if you owe $5,000, your penalty will be $25 a month. Not fun, but not the end of the world.
The failure-to-file penalty is 10 times worse -- 5% per month of what you owe, up to 25% total. So if you owe $5,000, not filing is going to cost you $250 a month. After five months, you'll owe the max of $1,250.
Since filling out and filing an extension form (.pdf file) only takes a few minutes, you've got to be either rich, crazy or both not to.
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