Before you file: 7 last minute tax tips

Here are a few things to remember if you're pushing the deadline....

Apr 15, 2010

Every year, the government requires you to pay up for unpaid taxes from the previous year. However, there are tons of ways to get money back from the government for those who file in a timely manner and take advantage of the great tax deductions and credits available for this year. If you still haven’t filed a return, you’ve got until the end of the day to do so (or to file an extension), so here are a few things to remember if you’re pushing the deadline.

If You Need an Extension: You can file an extension by April 15th, which will give you six more months to file your taxes, until October 15th. File an extension using Form 4868, available on the IRS website (www.irs.gov). The catch is that if you think you’re going to owe the government money, you must estimate the amount you think you owe (up to about 90 percent) of it and make that payment when you file for your extension. Otherwise, you’ll get hit with late payment penalties of about 5 percent each month of the tax due (up to a maximum of 25 percent), and interest will accrue on what you owe. Then, if you qualify for a refund, you’ll get that money back.

If You Can’t Pay the IRS by April 15th: Can’t make any sort of payment? You should still file for an extension, but be sure to contact the IRS who will come up with a payment plan for you to pay off what you may owe before the extension deadline runs out. You can request to pay the estimated taxes you owe in monthly installments by signing up for the online payment agreement. Submit Form 9465 with your return, stating the amount you are prepared to pay each month. If the IRS accepts your request, remember that there is a one-time fee of $105 for making this arrangement (or $52 if you agree to make payments electronically.) But, you can get out of paying that, too: If you can pay the full amount you owe in 120 days, the IRS will waive the fee.

If You Made A Mistake on Your Return: Simple math errors will be corrected by the IRS and you’ll receive a notice of those in the mail. However, if there was a credit or deduction you qualified for but skipped, or you claimed something you didn’t actually qualify for, you should file Form 1040X to amend your return. If you’re claiming an additional refund, you have three years from the date you originally filed, or within two years of paying any taxes (whichever comes later) to file the 1040X form.

If You Think You Qualify for Deductions and Credits: A rule of thumb to remember – deductions are good, but credits are better! A tax deduction reduces your income amount, therefore you will be taxed on less income. However, a credit actually reduces your liabilities dollar for dollar. So, if you spent money to buy a home this past year, you might qualify for the First-time Homebuyer Tax Credit, which will get you a check from the government for $8,000 if you’re a first-time buyer and $6,500 for existing homeowners who close on a home purchase by June 30, 2010. (The catch: You must file a paper return with appropriate documentation in order to get this credit. No e-filing!) If you “greened” your home this year or took classes at the college level, be sure to see whether or not you qualify for the energy property credit or the American Opportunity and Lifetime Learning Credits offered.

If You Were Unemployed in 2009: The first $2,400 of your income you did earn is tax-free, says Roni Deutch, a California-based tax attorney. Anything above that amount is taxable. If you opted to take unemployment benefits, you’ll probably be getting a 1099-G in the mail, which will require you to pay taxes on the unemployment income you’ve received.

If You Donated Money to Haitian Relief Efforts: You are eligible to claim a tax deduction on your return if you made a donation to any Haiti relief organization by the end of February 2010. Make sure you have the appropriate documentation to verify your donation.

If You E-File, You Save Yourself a Big Headache: Be sure to e-file! It’s the safest, fastest and easiest way to file your taxes (which is why more than 80% of filers do it this way.) The online e-file process walks you through everything, which means you’ll likely make fewer mistakes. And, you’ll get your refund really fast! Once you e-file and the government accepts the return, you’ll likely get your refund deposited to you within two or three weeks!