I find that people procrastinate on filing personal income tax returns for a few reasons. They’re either overwhelmed with the process, experienced a major life change and don’t know how to itemize deductions, can’t pay outstanding tax debt or don’t want to commit the time to get it done. Whatever your reason for waiting, it’s time face your fear of filing by following these last-minute tax prep tips so you avoid potential penalties and interest fees.
BIG LIFE CHANGE, HIRE A TAX PRO.
If you have experienced a major change in your life last year that’s going to make filing more complex, say, you moved, got married or divorced, had kids or started a new business, hire a professional to ensure accurate filing to avoid penalties on any potential mistakes. Some individuals who are overwhelmed by the whole tax process or don’t want to devote the time necessary to prepare their return may also benefit from expert assistance.
If you need help with your taxes but can’t afford to hire a professional, you may be eligible for free filing assistance through the IRS Volunteer Income Tax Assistance program as long as you make less than . Find a center near you here: http://irs.treasury.gov/freetaxprep/
PRESSED FOR TIME, FILE ONLINE.
It’s easier, faster and more secure than processing your returns by mail. Another upside: Electronic filing may also help you avoid costly mistakes. The IRS found that 20% of income tax returns prepared on paper contained mistakes and half of those errors caused folks to overpay their taxes. Meanwhile, only 1% of returns prepared electronically contained errors — so, the stats are in the e-filer’s favor!
Get step-by-step assistance using tax software from TurboTax or H&R Block. You can find coupons codes like 15% off H&R Block online tax software available at Coupon Sherpa to reduce the tax preparation cost.
FILE BY DEADLINE – NO MATTER WHAT!
Failing to file by April 15 will result in a penalty which is usually 5% of the unpaid taxes for each month or part of a month that a return is late. If you cannot pay all the taxes you owe, file your tax return on time anyway so you don’t waste money on penalties and interest. The failure-to-pay penalty is less anyway.
It’s far better to file an extension than to submit a return full of mistakes. Download Form 4868 from the IRS website for an automatic 6-month extension and take the time to review options for deductions and credits while gathering all necessary documents, forms and receipts. Keep in mind though, just because you file an extension doesn’t mean you get an extension to pay outstanding taxes.
EXPLORE PAYMENT OPTIONS
If you can’t pay outstanding tax debt related to unemployment, bankruptcy or other economic hardships, you may be eligible to make monthly payments through an online payment agreement. Even if you’re ineligible, you can still pay in installments. Complete and mail the Installment Agreement Request Form 9465.
DON’T OVERLOOK DEDUCTIONS
With just two weeks until the looming tax day deadline, rushing to file often leads to mistakes and overlooked credits and deductions that could save you hundreds or even thousands of dollars on your tax bill. According to H&R Block, 1 in 5 filers who prepare their own taxes disregard benefits and lose out an average of $460 in either credits or deductions.
Review eligible credits and deductions at www.irs.gov/Credits-&-Deductions
SPEND YOUR REFUND WISELY
If you’re expecting a tax refund, don’t think of it as free dough. It’s your hard-earned money that Uncle Sam was simply holding on to all this time. Use those funds wisely by following one of my 10 suggestions below.
- Stash it away for a rainy day and open an online savings account with better interest rates.
- Pay down a credit card or student loan debt.
- Plan for your kid’s college education and open a 529 savings plan.
- Tackle a necessary home repair you’ve put off.
- Install a programmable thermostat to help manage your energy bill.
- Invest in yourself: learn a new skill/language, enroll in a continuing education course or update your website to better promote your services.
- Replace an old appliance (10+ years!) with an energy efficient model.
- Make an extra mortgage payment, especially if paying Private Mortgage Insurance (PMI).
- Open a ROTH IRA for you or your spouse.
- Attend a conference & grow your network — it’s the most powerful marketing tactic for personal & professional growth for an individual or business.
If you’re receiving a tax refund, how do you plan to spend it? Share your smart ideas with me!
Save for the things that matter
Without giving up the things you love
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