Tags: US | Taxes | Last | Minute

Fear of Filing Could Inflate Your Income Tax Bill

Wednesday, 07 April 2010 01:43 PM EDT

Don't Panic.

No matter what your reason for leaving your tax return until the last minute, there's no need for fear. Letting the annual ritual intimidate you could result in mistakes that delay your refund or even cost you money.

Instead, seek out some free help and with a bit of patience you can file your return with confidence.

If you haven't filed, you're not alone. Through the end of March, the number of returns submitted to the Internal Revenue Service was down 2.4 percent from the same time last year. Continuing a multi-year trend, individuals have filed 7 percent more returns electronically, while professionally prepared returns are down 2 percent.

The economy plays a part in pushing down the number of taxpayers seeking professional help. But another reason more are opting to do it themselves is that tax-preparation software takes the most daunting aspects of filing taxes out of the equation. And most taxpayers — 70 percent, the IRS says — can file using free software available through the agency's Free File program. If your adjusted gross income was $57,000 or less, you can choose a program in a few clicks by visiting http://www.irs.gov.

Here are some tips for making the last-minute filing process go smoothly:

Avoid common errors

Tax software will walk you through the process, but even the best program can't protect you from entering bad information. Take your time and make sure everything you plug in is error-free.

The most common mistake is entering the wrong Social Security number for yourself, your spouse or a dependent. "They'll nail you on that instantly," said Tim Steffan, financial and estate planning manager for Baird Private Wealth Management in Milwaukee. If IRS computers detect a mistake, it could delay your refund while the problem is resolved.

Another common mistake is providing the wrong bank account number for direct deposit. You'll get your refund faster — in 10 days or less, the IRS pledges — if you use direct deposit. But that won't happen if you don't give the correct account number.

If you opt to receive a check, make sure you provide the correct mailing address. Nearly 108,000 refund checks worth a total of $123.5 million were returned to the IRS as undeliverable last year.

Look out for what's new

Do-it-yourselfers often miss changes to the tax code when preparing their own returns, said Marc Steber, Jackson Hewitt Tax Service's chief tax compliance officer. That's because they often simply copy from the previous year's return. That would be a mistake because there are a number of new items that can help reduce your tax bill — or boost your refund.

Among the changes you won't want to miss:

— The American Opportunity Credit, a modification of the older Hope credit for college costs. It can now be claimed for four years of college, up from two, and the ceiling was raised by $700 to $2,500. In addition, the costs of books, supplies and possibly computers can be added in, along with tuition and fees.

— The residential energy efficient property credit allows homeowners to claim up to 30 percent of the costs for alternative energy equipment like solar electric systems or fuel cells. You may also be able to claim up to $1,500 for the costs of high-efficiency heating and air conditioning systems, insulation and other energy-saving improvements.

— New vehicle sales tax deduction, allows taxpayers who earned up to $135,000 to deduct some or all of the state or local sales or excise taxes paid on new cars, light trucks, motor homes and motorcycles purchased between Feb 16 and Dec. 31.

— The Making Work Pay Credit provides most taxpayers a refundable credit of up to $400 if they earned $6,451 or more in 2009 ($800 for joint returns showing income of $12,903 or more.) Most wage earners received the funds as reduced withholding in their paychecks, but you could be due more if you didn't reach the maximum. Unlike other credits, claiming this one requires filling out a separate form, which most tax software will do automatically.

Itemize and you may save

Although nearly two out of every three returns claim the standard deduction, itemizing will often result in a lower tax bill — especially for homeowners.

That's true even though the standard deduction increased for most taxpayers. For 2009, it's $5,700 for single taxpayers and $11,400 for married couples. Among the deductions you may qualify for if you itemize:

— Interest on home mortgages and home equity loans on primary residences.

— Medical costs that add up to 7.5 percent or more of your adjusted gross income.

— Charitable contributions to qualified organizations that can be documented with receipts.

— Required expenses for work that were not reimbursed by an employer, and job hunting costs for new positions in the same or a similar field.

Finally, if you can't possibly get your return completed by April 15, you can file online for an extension until Oct. 15. It's a simple process, but remember that the extension is only for filing a return, not for paying any taxes due.

© Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don't Panic.No matter what your reason for leaving your tax return until the last minute, there's no need for fear. Letting the annual ritual intimidate you could result in mistakes that delay your refund or even cost you money.Instead, seek out some free help and with a...
Wednesday, 07 April 2010 01:43 PM
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