Tax tips for procrastinators
By Katherine Boyle,
This year, we have two extra days before the taxman cometh. But an April 17 deadline isn’t a license to procrastinate. Tax returns take time, and doing them right can mean paying less or having enough time to prepare for the worst. Each year, experts see perpetual procrastinators wait until the last few days to file. Often, these are the people who need to be filing — or at least calculating what they owe — early in the year.
“They’re afraid to know what the bottom line is going to look like,” said Gil Charney, a principal tax analyst at H&R Block’s Tax Institute. “People who think they’re getting a refund don’t procrastinate, but everyone should go through the motions of preparing. That way you won’t be saying, ‘Oops! I owe a $1,000. How do I pay that?’ ”
For last-minute filers, common mistakes can mean the difference between a small tax credit and thousands of dollars in your pocket. We spoke to experts about common questions they hear and mistakes to avoid when preparing tax returns. Employing simple strategies and double checking your work can make the process easier for both first-time and seasoned taxpayers.
Garbage in, garbage out
According to H&R Tax Institute, only 6 percent of filers still use the pen and paper we used to dread when doing tax returns. “The mistakes we see now are not what I would consider to be traditional,” said Bob Meighan, a CPA and the vice president of TurboTax tax preparation software. “Software catches mathematical errors, but it can’t check your name and Social Security number — people think they know this, but it’s one of the most common reasons the IRS rejects returns.” Double check the vitals, including your bank account number. So many people choose to have tax refunds deposited directly into bank accounts — you don’t want to wait months for a pay day because you missed a few zeros.
In an increasingly paperless world where we’ve come to rely on e-reminders, it’s easy to overlook a key tax form. Make sure you have all your tax documents together so you don’t miss anything. “You can easily have two or three 1099 forms you need to fill out for miscellaneous income. All the tax documents are available online, so don’t think just because you don’t have it in front of you that you’re not responsible for paying what you owe,” said Charney of H&R Block. Pull out a copy of last year’s tax return to see whether there are significant differences in how you’re filing. Even if you submit your return electronically, print it and check for errors. You’ll catch more in a hard copy-edit.
Remember the deductions
In your haste to file, you might overlook deductions you’re entitled to. “If you’re itemizing on your tax return, procrastinators often forget to claim things like donation of goods, mortgages, even deducting the miles you drive to volunteer at a soup kitchen — every little bit helps,” Meighan said. Also, if you’ve waited till the night before the filing deadline, you might not be able to locate the receipts you need to itemize.
You haven’t changed, but it has
Every few years, the IRS changes its tax code, and that could have a dramatic effect on how you file or what you owe. Just because you’re life hasn’t changed — no new kids, no marriage or divorce — doesn’t mean that you don’t qualify for a new exemption. Read about what’s different: “Sometimes exemptions expire, but if you’re using tax software, it should inform you of what’s new,” Charney said.
Most common questions tax pros get
“There are two areas people always ask about: one is claiming dependents and the other is filing status or whether to file as head of household,” Charney said. “The rules are very complicated, and they’re not as clear cut as they used to be.” Meighan added: “Software prevents errors on this for the most part, but you have to pay attention. Sometimes your boyfriend or girlfriend may qualify as a dependent.”
When it’s time to get a tax professional
Two-thirds of taxpayers file a simple return that doesn’t require the help of a professional. But the penny-wise, pound-foolish adage rings true when it comes to taxes. “If you’re not confident, it’s always a good to talk to a tax pro. The cost is cheap when compared with what you might save,” Charney said. Also, people with foreign income, rental properties or side businesses, or people who want sophisticated tax planning for estates, should visit a professional.
When to file an extension
There’s no penalty for filing an extension, but an extension doesn’t get you out of paying taxes owed. “If you don’t have everything ready in April, file an extension,” Meighan said. “But that does mean if you owe taxes, you still have to pay them by April 17. People may ask, ‘How do I know what I owe?’ Make a good guess. You can overpay and then get the refund as soon as you file.”
Can’t pay? File anyway
It’s a tough economy, and you might not be able to pay your taxes on time. But failure to file and failure to pay are met with separate penalties. Even if you can’t pay a dime, file your taxes. The IRS’s installment plan allows taxpayers to make monthly payments (with interest), and avoiding a failure-to-file penalty is always the best option.
THE BOTTOM LINE If you’re just realizing you need to file taxes soon, you’re behind. Paying taxes is a year-round commitment with a due date in April, and procrastinating can make paying a more painful process. Keep receipts, spread out the work and check for silly errors that might mean months of wrangling to get your refund check.
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— Janet Bennett Kelly