Last-minute tax tips for procrastinators
By DAVE CARPENTER AP Personal Finance Writer April 12, 2012 1:30PM
Avoid common mistakes on your tax return, including misspelled names and incorrect Social Security numbers. | File
Updated: April 12, 2012 3:58PM
Getting an extra two days to file taxes beyond the usual April 15 tax filing deadline isn’t likely to cure a nation of procrastinators this year.
Tens of millions of us routinely wait until just before the deadline to file returns. More than 30 percent of taxpayers filed the week before Tax Day or later via extensions in 2011, and Internal Revenue Service statistics show the pace is similar this year.
Perhaps working under deadline pressure helps you focus better on the task at hand. But procrastinating may come at a price.
“The amount of work that’s going to need to be done at the last minute is no less just because you’ve waited, and the potential for errors is greater,” says Suzanne Shier, a tax strategist at Northern Trust Bank in Chicago. “There’s not really an upside to waiting.”
So you probably should dive into your tax return without waiting any longer.
Either way, there’s little time left to round up records and research the details of any tax code changes from last year.
Here are some points for end-of-season tax filers to keep in mind:
THE PRICE OF RUSHING
It’s easy to miss possible deductions that will lower your taxes if you’re in a hurry. With the clock ticking down, you might not try as hard to look for them.
Along with simple math errors, late filers also are prone to transposing Social Security numbers or birthdates on their returns. Not only can such snags delay your refund, you might not even be allowed to file your return online if all the numbers of you and your dependents don’t match up properly with the records. That might be an issue if the 11:59 p.m. Tuesday deadline is looming and you can’t quickly figure out what the problem is and how to fix it.
Don’t use estimates because you’re short on time. H&R Block sees a lot of instances in which taxpayers guess on their adjusted gross income from the previous filing year as well as their e-file pin number, says Elaine Smith, master tax adviser for the tax preparation giant.
Round-figure estimates don’t help your chances of avoiding an audit, either.
DEDUCTIONS TO REMEMBER
There’s only about one action you can take at this late date to reduce your 2011 taxes, according to Mark Luscombe, principal federal tax analyst for the CCH consulting firm in Riverwoods, Ill.: Contributing to an individual retirement account for 2011. Taxpayers have until Tax Day to contribute to an IRA and get a deduction.
Aside from IRAs, make sure you claim all eligible deductions for moves you made last year.
Charitable contributions are high on any list of deductions often missed. Diligently go through your checking account and credit card accounts to check for specifics of that $300, $500 or $800 you recall giving to your church or favorite qualified charity.
Another one that’s frequently overlooked is for heavy medical expenses. If your health expenditures shot up last year, be aware that you may deduct the amount by which your total medical care expenses for the year exceeded 7.5 percent of your adjusted gross income.
A lot of taxpayers also fail to take deductions for eligible gambling losses. Just as gambling winnings are fully taxable and must be reported, losses from horse races, casinos and other legal wagers may be deducted. Sorry, losses from your March Madness office pool don’t count.
If you’re comfortable going it alone and didn’t have any significant changes from the previous year, it should be easy to file online. You can do it right up until midnight Tuesday. Do-it-yourself tax preparation software should walk you through trouble spots, and online help is plentiful.
If you’ve had a life change such as a move, new job, baby or withdrawn money from a retirement account, that might be the trigger to see a professional tax preparer. H&R Block, TurboTax and others offer their customers free advice via phone, online chat or video conference if you get hung up.
Those who think they may miss the deadline should ask the IRS for more time to file. You can do so by submitting form 4868. Six-month extensions are granted automatically; you’ll have until Oct. 15 to file taxes.
Filing for an extension will enable you to avoid a late-filing penalty, normally 5 percent per month based on the unpaid balance. And you can reduce or eliminate interest and late-payment penalties if you send in a payment by the deadline. The current interest rate is 3 percent per year, compounded daily, and the late-payment penalty is normally 0.5 percent per month.
The IRS received 10.5 million extension forms last year, 4 million of them electronically. You can do so at www.irs.gov, just as you can request an extension online for your state tax return.
Whatever you do, don’t give in to any temptation to skip the process. Not filing a return when required is considered income tax evasion with penalties that include paying back taxes, interest and possible fines, and possibly even serving a prison sentence in the most serious cases.