7 last-minute tips for tax procrastinators
Time to take your head out of the sand, procrastinators – April 15 is just over a week away, and if you haven't begun preparing your 2013 tax returns yet, it's time to get cracking. It takes an estimated 16 hours to fill out a 1040, according to the IRS, though most taxpayers spend less time than that.
More than half of taxpayers had already filed returns by mid-March, but millions still had not sent in their returns. If you're in the latter group, here are seven tips to make the most of the very limited time you have left.
1) Make sure you have all the necessary documents. In addition to your W-2 and other forms, you'll need to gather your 1099s that show income from freelance work, interest, or dividends. If you plan on deducting interest for a mortgage or student loan, you'll need 1098s. It's also important to gather documentation for any charitable contributions you made throughout the year if you plan to deduct that as well. "Start by looking at last year's returns to get a sense of which documents you'll need this year," says Thomas A. Spychalski, tax partner at ParenteBeard.
Don't panic if you're missing one or more necessary documents. Most banks and brokerage houses allow you to access and print such records online, and your human resources department should be able to reproduce a lost or missing W-2 pretty quickly.
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2) There's still time to reduce your tax bill. Even though the tax year ended in December 2013, you may still be able to nab some additional deductions. If you're eligible to make tax-deductible contributions to an IRA or an HSA (eligibility depends on your income), you can still make contributions through April 15 and claim them on your 2013 taxes. "Just make sure to designate any contributions made now as a 2013 contribution, otherwise they won't count on this tax bill," says Lindsay Buchholz, senior analyst for The Tax Institute at H&R Block.
3) It's not too late to get help. If you're like an estimated 60 percent of tax filers who prefer to get professional assistance with their taxes, there's still time. Hiring help may be worth it: A study last year by H&R Block found that one in five DIY filers could have owed less or gotten a higher refund, worth an average of $460 per person.
While some smaller CPA firms may not be taking on new clients for this tax season the larger firms and the tax-prep chains can likely still help you. Call around to get an appointment or see if local preparers are taking walk-ins.
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Just because you're in a hurry, don't neglect to check out the tax preparer before handing over your financial documents. All tax preparers must have an IRS-issued preparer tax identification number to legally do your taxes. Better to go it alone than trust your return to a so-called pro who's lacking in either experience or ethics. Remember, you're legally responsible for the accuracy of a return, even if someone else has prepared it on your behalf.
4) E-filing is your best bet. Filing your taxes online is not only more secure and more accurate, but it also cuts out the need to run to the post office or handle any concern that a return didn't actually make it to the IRS. Plus, your refund will arrive more quickly than if you had filed by snail mail.
5) Double-check everything. When you're rushing to complete something, it's easy to make mistakes, which can end up being very costly when it comes to your taxes. Computer programs are great at catching math errors, but they won't know if you've transposed the digits on your Social Security number or incorrectly transferred numbers from your W-2. Print out your return before pressing the "send button" and check all of your numbers for human error.
If time permits, put the return aside for a day and look over it again with fresh eyes. "If you're in a mad rush and finishing off your taxes at the last second, that's when mistakes are more likely to occur," says Steven Warren, a CPA at Minneapolis-based Lehrman, Flom & Co.
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6) Just because you got an extension doesn't mean you don't have to pay. If you're really unable to get your returns finished by April 15, you can file for a six-month extension by filling out a Form 4868. However, even if you do that, you're required to make a good-faith estimate of the taxes you owe and to remit payment by April 15. Failing to file can result in fees and accrued interest that can push your obligation even higher. In addition, the IRS can put liens on your home or garnish your wages if you've made no effort to pay what you owe.
If you don't have the cash to immediately cover your projected tax bill, file anyway. There are options to help you cover the bill. "The best course of action is to file now and arrange a payment plan from the IRS or borrow the money from someone else," says Mark Steber, chief tax officer at Jackson Hewitt Tax Service.
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7) You can always file an amendment. If you do file a return and then realize that you made an error or forgot to take a deduction to which you're entitled, you have three years to file an amended return to rectify your mistakes.
—By Beth Braverman, The Fiscal Times