(ARA) – As the tax deadline draws near, it’s common to suffer from deadline anxiety. If you are one of the millions of taxpayers who have put doing your taxes on the backburner, the first rule is not to panic. Here are some last minute tax tips to consider:
* Crunch it with software.
Tax software (online or the kind you install on your home computer) does more than calculate the financial data you enter.
According to Stephanie Behrends, spokeswoman for 2nd Story Software, Inc., makers of popular TaxACT tax preparation software and Web-based services, “One of the most important benefits that tax software provides is that it is current on all of the tax law changes. Coupled with a thorough interview format, tips and alerts systems, and easy-to-understand explanations, software like TaxACT reduces the likelihood for errors to occur, and expedites the preparation process — while maximizing the credits and deductions specific to your tax situation.”
Don’t have all your financial information yet? No problem. Not only does tax software offer do-it-yourself tax preparers the ability to stop and come back to the return you’ve begun to prepare; software also allows you to work on any part of your return — making it possible to prepare your taxes in stages.
* It pays to e-file and use direct deposit.
E-filing eliminates most opportunities for mistakes and enables filers to receive their refunds faster. Better still, when coupled with direct deposit, you can receive your tax refund in as few as 10 days.
As of March 20, the Internal Revenue Service (IRS) has reported it has accepted more than 57 million e-file returns — up from 8.6 percent of the total for the same period last year.
* Avoid common mistakes.
Entering an incorrect tax amount you’ve transferred from documents can be costly — even software can’t predict the dollar amount reported in box four on your W-2. So double check your numbers after you’ve entered them. Other common errors include checking the wrong filing status and listing name changes that weren’t reported to the Social Security Administration. For example, if you were married last year, make sure the name you use to file your tax return appears as it is represented on your Social Security card.
* File an extension.
If you’re concerned you won’t get your taxes in by the deadline, you can file for a six-month extension using Form 4868. If you don’t, you’ll pay a 5 percent penalty each month on any unpaid balance you owe the IRS. And remember, this is an extension for time to file, not an extension of time to pay. This means you will need to estimate your taxes. If you determine that you have an amount owed to the IRS, you are obligated to remit payment to the IRS by April 15.
What should you do if your return is completed but you are unable to pay the full amount due with your return? Don’t request an extension. File your return on time and pay as much as you can. The IRS will send you a bill and a notice for the balance due and charge interest and penalties only on the unpaid balance.
* Already Filed? What documents to keep, what to toss.
It’s a good idea to keep documentation for a minimum of three years — this is how long the IRS has to audit past returns you have filed. However, IRS audits can go back six years if it believes income has been underreported by 25 percent or more. In extreme cases, the agency can go back even further if it believes fraud has been committed. So, keeping your tax documents, receipts and other related items for seven years may well provide you the best security blanket.
Need specific tax tips and advice? Visit www.irs.gov/newsroom and click “Tax Tips 2008.” Information concerning how to request an extension for the time to file and installment agreements is available at the IRS.gov — just click on the “1040 Central” link found on the home page. More information regarding TaxACT can be found by visiting www.taxact.com/.
Courtesy of ARAcontent