If you haven’t filed your taxes yet, you're not alone. According to the IRS, as many as one-third of all Americans wait until the last minute to file. While you may feel like you have ample time remaining, the clock is ticking and April 17th will be here before you know it.
How do you know if you need to file? You must file a federal tax return if you meet certain income and age requirements. The IRS can walk you through the requirements here: http://www.irs.gov/individuals/article/0,,id=96623,00.html.
For most W-2 employees (your W-2 is the form your employer either gives you or mails you that outlines your tax contribution), the tax filing process is easy, so why wait any longer? Here are a few more tips to make filing this year a breeze:
1. Always file on time
Filing your return late will only add to your financial woes if you already owe more than you can pay. The late filing penalty is 5% per month of what you owe, which means the more you owe, the more you’ll be penalized. If you can’t pay the full amount, pay what you can, and include Form 9465-FS, a request for an installment agreement that will allow you to set up tax payments over an extended period of time.
Alternately, you can call the IRS or apply online. If your request to pay in installments is accepted, you will be charged a variable setup fee of $43, $52, or $105, depending on your situation. However, if you can pay off the balance within 120 days, you won’t be charged this fee. Ideally, you want to avoid paying in installments at all. Like any debtor, the IRS will charge interest on the unpaid amount.
2. File online for free
You can complete your federal return for free through the IRS website, regardless of your income. However, if your adjusted gross income (AGI) is less than $57,000, you can choose from a host of free online tax preparation services that will guide you through the process and also file your federal return for free. That said, most will charge to file your state return. If you’re ultra-frugal, visit your state’s tax website to see what low or no-cost options are available.
3. Consider itemizing
Most people who own a home know that itemizing takes a serious bite out of their tax bill because of the home mortgage interest deduction. But even if you aren’t mortgage-strapped, you may want to itemize, especially if you had a large number of un-reimbursed medical or job expenses last year. Medical expenses become eligible for deduction in excess of 7.5% of your AGI, and job expenses can be deducted over 2% of your AGI.
If you’re not sure, just enter your expenses into an online tax prep program. It will quickly determine whether itemizing or using your standard deduction will save you more money.
4. Sign the return
Each year, more than one million people simply forget to sign their return. If you’re one of them, you usually won’t incur any penalty or additional taxes, but it will delay your refund. Keep in mind that both spouses need to sign if filing taxes jointly, and the return must be dated as well. Furthermore, if you pay someone to prepare the return, that person’s signature is required too.
If you realize you forgot to sign after mailing the return, don’t panic. Just wait for the IRS to send it back. Then, sign it immediately and drop it back in the mail via certified post. If you file online, you’ll be prompted to sign electronically.
5. Take time to review
Filing your taxes might seem like an inconvenience, but if you make a mistake you could be looking at a penalty, a tax audit, or a reduced refund. Not only do you want to take care while you’re filling out your return, you need to give yourself time to review it before you submit.
Wait at least one day, and ideally several days, before you review your return. You may remember donations, other missed deductions, or even interest or dividend income you forgot to report. A few minutes double-checking your return could be all it takes to keep the IRS from knocking on your door.
6. Properly mail the payment
If you send in a paper return and payment via the postal service, make the check payable to “United States Treasury.” Enclose it with your return, but don't attach it – no staples or paper clips. On the check, include the social security number of the first person listed on the return, a contact phone number, the tax year, and which 1040 form you used. Which state you live in and whether or not you owe will dictate where you’ll send your return.
Check the IRS website for the proper address, and send via certified mail. Keep a copy of your receipt.
If you typically receive a large refund, you may want to submit a new W-4 (the tax form your employer gives you when you first start) with your employer to adjust your withholdings. Otherwise, you’re essentially giving the government an interest-free loan on your hard-earned money throughout the year. Plus you’ll get a bigger paycheck and can better budget that money instead of dealing with, and possibly blowing, a large refund next April.
Have you filed your taxes yet? If not, what are you waiting for?