Spring is here, and with the warmer weather, blooming flowers and chirping birds comes one of the most dreaded days of the year: tax day. That’s right, Uncle Sam is once again calling us to break out our adding machines to crunch numbers and file forms until the wee hours of the morning. Make this tax season less stressful with a few helpful hints from Enrolled Agent John Ro on what not to forget this year.
- Know your deadline. Taxes must be filed by April 17, 2012 due to the celebration of Emancipation Day. Make sure to take advantage of the 24-hour reprieve…
- Penalties can add up quickly. Failing to file by April 17 will cost 5% each month (up to a maximum of 25%) of your unpaid tax liability. Failing to pay by April 17 if you owe will cost you 0.5% per month (up to a maximum of 25%) of your unpaid tax liability. Filing an extension will cover a failure-to-file penalty, but not a failure-to-pay penalty.
- Don’t forget to take credits! In past years, the Making Work Pay Credit, First-Time Homebuyers Credit and Earned Income Tax Credit would have netted individuals anywhere from $400 to $8,000. These are often overlooked by those who file their own returns.
- Federal tax is pay as you go. If you are self-employed, or your employer does not file for you, you must make estimated tax payments quarterly. If they are not made on time, you can incur penalties.
- Plan for the future. If you were younger than 50 years of age at the end of 2011, you can contribute the smaller of $5,000 or your taxable income to your IRA. This can be divided between a traditional IRA and a Roth IRA. For those age 50 and older at the end of 2011, the maximum contribution goes up to $6,000.
- Taxes are a complicated business. If you’re not sure what you’re doing, or just need a little guidance, seek the help of a tax professional.
- File for an extension. If you miss the deadline, all hope is not lost. You can still get an automatic 6-month extension of time to file through your tax professional, software or on the IRS website. Your filing deadline will become Oct. 17; however, if you owe taxes they must be paid at the time you file the extension.