April 13, 2013
The deadline for filing your federal, state and school district taxes is Monday, and it’s also Monday for many area local municipalities.
If you’re one of those people who like to wait until the last minute, here are some tips to help you navigate the tax system.
How do I pay online?
Taxpayers with a balance due now have several quick and easy ways to electronically pay what they owe. They include:
•Electronic Federal Tax Payment System (EFTPS). This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll or for more information, call 800-316-6541 or visit www.eftps.gov.
•Electronic funds withdrawal. E-file and e-pay in a single step.
•Credit or debit card. Both paper and electronic filers can pay their taxes by phone or online through any of several authorized credit and debit card processors. Though the IRS does not charge a fee for this service, the card processors do. For taxpayers who itemize their deductions, these convenience fees can be claimed on Schedule A Line 23.
Taxpayers who choose to pay by check or money order should make the payment out to the “United States Treasury.” Write “2012 Form 1040,” name, address, daytime phone number and Social Security number on the front of the check or money order. To help insure that the payment is credited promptly, also enclose a Form 1040-V payment voucher.
— Kevin Hunt, The Hartford Courant
Do it yourself?
Let’s start with the advantages of preparing and filing your own tax returns electronically. The main advantage: It’s free. Secondly, there is less chance of making an arithmetic error, because the software does the basic computations for you.
Now let’s talk about the disadvantages:
•Unless your taxes are very simple, you run the risk of making costly mistakes without knowing it.
•You are liable to miss tax-saving deductions and credits.
•If you have questions, you have to find the answers yourself or call the IRS and FTB tax help lines, which could mean spending lots of time on hold.
•If you receive a tax notice from the IRS or FTB, you have to figure out what the notice means and how to respond.
Income tax has its own language. Words that have one meaning in general usage may mean something entirely different in the world of income taxation. What you think you know, you may not know.
Among the advantages of using a well-trained professional tax preparer: You get the benefit of his/her training and experience. You lessen the chance of errors. You reduce the possibility of missing valuable tax deductions or credits.
And if you receive an IRS or FTB notice regarding your tax return, you have someone knowledgeable to handle it on your behalf.
The potential disadvantages of using a professional?
You have to pay fees. You have to decide whom to use, which can be daunting, since professional tax preparers range from unlicensed individuals to multi-national accounting firms. There’s a possibility of using a bad preparer — or a good preparer who makes an error on your return.
Almost 60 percent of Americans filing federal income tax returns use a tax preparer, according to the IRS.
Increasingly, there is no such thing as a simple income tax return, given the growing complexity of this country’s tax laws. Throw in state differences from the IRS rules, and you face a tax-filing landscape full of traps for the unwary.
—Gregory Burke, Sacramento, Calif., CPA and IRS expert
Do I have to pay right now?
Taxpayers who have finished their returns should file by the regular April 15 deadline, even if they can’t pay the full amount due. In many cases, those struggling with unpaid taxes qualify for one of several relief programs, including the following:
•Most people can set up a payment agreement with the IRS on line in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement to set up a monthly payment agreement for up to 72 months. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS. With the Online Payment Agreement, no paperwork is required, there is no need to call, write or visit the IRS and qualified taxpayers can avoid the filing of a Notice of Federal Tax Lien if one was not previously filed. Alternatively, taxpayers can request a payment agreement by filing Form 9465. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.
•Some struggling taxpayers may qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay. To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.
Details on all filing and payment options are on IRS.gov.
— Kevin Hunt, The Hartford Courant
What if I make a mistake?
If you make a mistake on your tax return, it usually takes the Internal Revenue Service longer to process it. The IRS may have to contact you about that mistake before your return is processed. This will delay the receipt of your tax refund.
The IRS reminds filers that e-filing their tax return greatly lowers the chance of errors. In fact, taxpayers are about 20 times more likely to make a mistake on their return if they file a paper return instead of e-filing their return.
The most common errors taxpayers make include:
•Wrong or missing Social Security numbers.
•Names wrong or misspelled.
•Filing status errors.
•Errors in figuring credits/deductions.
•Wrong bank account numbers.
•Forms not signed and/or dated.
•Electronic signature errors.
— Paula Burkes, The Oklahoma City Oklahoman
How do I get an extension?
If it looks as if you won’t file your taxes by Monday, get a six-month extension online. Here’s how it works, courtesy of the IRS:
The Internal Revenue Service reminded taxpayers that quick and easy solutions are available if they can’t file their returns or pay their taxes on time, and they can even request relief online.
The IRS says don’t panic. Tax-filing extensions are available to taxpayers who need more time to finish their returns. Remember, this is an extension of time to file; not an extension of time to pay. However, taxpayers who are having trouble paying what they owe may qualify for payment plans and other relief.
Either way, taxpayers will avoid stiff penalties if they file either a regular income tax return or a request for a tax-filing extension by this year’s April 15 deadline. Taxpayers should file, even if they can’t pay the full amount due. Here are further details on the options available.
People who haven’t finished filling out their return can get an automatic six-month extension. The fastest and easiest way to get the extra time is through the Free File link on IRS.gov. In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an automatic tax-filing extension on Form 4868.
Filing this form gives taxpayers until Oct. 15 to file a return. To get the extension, taxpayers must estimate their tax liability on this form and should also pay any amount due.
By properly filing this form, a taxpayer will avoid the late-filing penalty, normally five percent per month based on the unpaid balance, that applies to returns filed after the deadline. In addition, any payment made with an extension request will reduce or eliminate interest and late-payment penalties that apply to payments made after April 15. The current interest rate is three percent per year, compounded daily, and the late-payment penalty is normally 0.5 percent per month.
Besides Free File, taxpayers can choose to request an extension through a paid tax preparer, using tax-preparation software or by filing a paper Form 4868, available on IRS.gov. Of the nearly 10.7 million extension forms received by the IRS last year, almost 5.8 million were filed electronically.
— Kevin Hunt, The Hartford Courant
Can the IRS look on Facebook?
The Internal Revenue Service may be checking Facebook and Twitter pages of taxpayers whose tax returns show “red flags.”
According to several media reports, IRS officials have said they may check whether taxpayers have made public statements on Facebook or Twitter that contradict what people stated on their tax forms.
The IRS can only see information on social media that’s set to “public,” not information limited to “friends,” followers etc.
Judge Andrew Napolitano told Fox News Insider’s Stuart Varney that one example would be a person leading a lifestyle inconsistent with a deduction they claimed on their tax return.
“Let’s say you took a trip that you characterized as a business trip and you deducted the cost of the trip from your income — perfectly legitimate if true — and the IRS looked at your Facebook page and saw you dancing with a grass skirt and hula hoop and a hat and drinking whatever,” he said, “‘This doesn’t look like a business trip. Look at Varney, what business is he doing?’”
As Napolitano pointed out, the government does not need a search warrant to check out information that people post publicly.
Keep that in mind when you file your taxes.
— Gitte Laasby, Milwaukee Journal Sentinel
Who gets automatic extensions?
Some taxpayers get more time to file without having to ask for it. These include:
•Taxpayers abroad. U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 17 to file. Tax payments are still due April 15.
•Members of the military and others serving in Afghanistan or other combat zone localities. Typically, taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3, Armed Forces Tax Guide.
•People affected by certain tornadoes, severe storms, floods and other recent natural disasters. Currently, parts of Mississippi are covered by a federal disaster declaration, and affected individuals and businesses in these areas have until April 30 to file and pay.
— Kevin Hunt, The Hartford Courant