Every year there are five common reasons why people don’t file their personal income tax returns by the April 15th deadline.
- Procrastination—This is hands down the most common reason. Certain people view tax preparation similar to going to the dentist and usually wait until it’s just too painful to avoid.
- Disorganization—These are the people who just don’t put all their tax records in one place and can’t seem to find any of the important papers they need to file their tax returns on time. Disorganized people lose out every year on big tax savings because they can’t substantiate or remember certain deductions.
- Tax Debt—These people just know that they are going to owe a tax payment and don’t have the money to pay their taxes by April 15. The best way to avoid this problem, if it’s habitual, is to adjust your tax withholding form (W-4) with your employer.
- Tragedy or Travel—People who go through a personal tragedy, like the loss of a spouse or are out of the country, for example, soldiers or people working abroad, usually need more time to gather their tax documents and file their tax returns.
- Small Business—People who own a small business usually have to catch up with their year-end business accounting and file their business corporate tax return (due March 15) before they can file their personal tax return.
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So what to do if you fit one the above categories? Unfortunately, the only legitimate reasons to file an extension are numbers 4 and 5. The first three reasons can cost you money. It is important to understand that while you can get an extension on preparing and filing your tax return, you cannot get an extension for paying your tax bill. If you think that you are going to owe the IRS money, you will need to estimate the amount due and send it in with your application for an extension. You must estimate how much tax you will owe (if you owe any) and send in that amount by the due date of April 17, 2012. Otherwise, you may be subject to penalties and interest.
You will need to fill out IRS Form 4868 in order to qualify for an extension. A tax extension allows you extra time to prepare and file your tax return. When you file for an extension, it is typical for the IRS to automatically grant you an additional six months, until October 15, 2012. In California, you are also granted an automatic six-month extension when you file the IRS form 4868 (you will need to check with your state as to the appropriate rule where you live). You can either e-file for your extension or you can print out the form from the IRS website and mail it in. If you owe taxes, you can make your payment electronically with an e-file application or if you are mailing in your application, you can include with it a check covering your payment due.
There is some good news for the procrastinator, the disorganized, the tax debtor, those who suffered a tragedy or serve in the military and the small business owner this year! The good news is that this year you have two extra days to do your taxes or pay someone to do them for you! Because the customary April 15 deadline falls on a weekend, you have until Monday, April 17. Maybe the thought of spending a nice spring weekend doing your taxes will motivate you between now and then. Happy tax season!
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SIX TAX DEDUCTIONS EVERY MOM SHOULD TAKE
If you are one of the millions of Americans who still hasn’t completed your taxes, here are six deductions you should take when preparing your return. If it’s too late and you’ve already prepared your taxes or if you forgot to take a deduction, no need to stress, as you can always amend your tax return. Just fill out a Form 1040X to claim your refund. And even better news, you have up to three years of the filing date to amend your return.
- Child and Dependent Care—All costs associated with childcare or caring for a parent or other dependent. However, it may be more beneficial to set aside money in a pre-tax account offered by your employer than simply claiming your child as a dependent on your tax return. (See example below.)
- Out of Pocket Expenses for Volunteer Work—If you volunteer and spend money on that activity, be sure to keep track, as it is a legitimate deduction.
- Charitable Mileage—If you drive as part of your volunteer work, you can deduct that mileage.
- Major medical expenses—This deduction applies to anything over 7.5% of your adjusted gross income. It won’t cover the costs of your medical expenses, but taking advantage of this deduction may help ease your financial pain.
- Flex Spending Account—This must be done at the time designated by your employer, but be sure to take advantage of your Pre-Tax Flexible Spending Account by setting aside contributions for medical expenses. You can save even more by setting aside some money, particularly if you know you will have medical or dental costs, in your Flex Spending Account. Why pay taxes on that money if you don’t have to?
- College Tuition Deductions and Expense Credits—If you attended a college or university in 2011 and paid tuition and fees, this is the last year you can take advantage of this deduction. Other costs associated with college (books, for example, cannot be deducted). If you are the parent of a college student or students, can only deduct their tuition if you still claim them as dependents.
Child & Dependent Care: Not participating in the dependent care benefits program available through employer. For some of them, it is better to put $5,000 pre-tax into the program than getting a credit on the personal tax return.
For example:
- $5,000 pre-tax contribution for child care expenses saves $1750 in taxes (Combined Fed & CA tax bracket at 35%).
- $5,000 child care expense on personal tax return saves $600 in taxes (Personal tax return only allows a maximum of $3,000 at 20% per child of adjusted gross income over $43,000).
