Your federal Income Tax Return: Last Minute Filing Tips

By Michael Lohr

If you haven’t yet filed your federal income tax return, you are probably starting to feel a little anxious; maybe even starting to panic somewhat?  After all, the filing deadline of April 17th is right around the corner. Hopefully, I can help alleviate some of your anxiety by pointing you in the right direction so you can get started.

The first thing you need to ask yourself is why you have not yet filed your return.

• Are you missing required documents?
• Maybe you think you’ll end up owing the IRS a huge chunk of change.
• Perhaps you’re afraid you’ll make a mistake and the IRS will come after you and throw you in jail.
• Or most commonly, you are completely overwhelmed with everything that you need to come up with by the tax filing deadline.

Let’s look at these tax filing hold-ups one by one and find your solution:

1.- Missing documents:  By now, you should have all of your required documents.  If you don’t, you cannot use that as an excuse to not file your return. The IRS holds the individual taxpayer responsible for timely filing. So, immediately:

• Request an extension, but only if you really need to.  An extension is your way of saying to the IRS, “Hey, I am going to file my return but I need more time.”  They will automatically extend your filing deadline until October 15, 2012.  However, if you owe money, you do not get an extension on the deadline for paying it.  This means that if you do owe money, and it is not paid by April 17th, you may have to pay interest, and in some instances, penalties.  By filing for the extension, however, if you do have to pay penalties, they may be reduced.

2.- You don’t have the money to pay the piper:  Depending on how much you owe, you have two options.

• If you think you will be able to pay the amount you owe, but just need more time to do so, you can set up a payment plan.  If you owe $50,000 or less in combined tax, penalties and interest and have filed all of your required documents, you can apply online.  If you owe more than $50,000, you must apply the old fashioned way using IRS Form 9465-FS Installment Agreement and IRS Form 433-F Collection Information Statement.

• If the amount you owe is so large that you don’t think you’ll ever be able to pay it, or doing so will cause you financial hardship, you may wish to consider an offer in compromise.  An office in compromise is not guaranteed, and the IRS looks at the circumstances of your situation before deciding to accept your offer.

3.- You are afraid of making a mistake:  I understand this completely.  It seems like the IRS has invented words and phrases intentionally to keep accountants in business.  And even if you do make an honest mistake, they will kindly correct it for you and politely send you a letter to let you know the outcome. So fear not!

• There are so many great software programs that will walk you through the income tax return process and help you avoid mistakes.  And best of all, many of the software programs are available online for free if you meet certain age guidelines and your income is $57,000 a year or less.

• Volunteer Income Tax Assistance (VITA) is available in local communities to people who make $50,000 or less and require only basic income tax return preparation assistance.

• If you don’t want to do it yourself and don’t meet any of the guidelines for free assistance, make an appointment immediately.  Don’t spend too much time trying to find the “best” one.  At this point, you may be better off finding a reputable individual rather than one of the popular tax preparation franchises.  They all use software and the end result is basically the same. Because it is so close to the tax filing deadline, and the chains are so busy right now, they may need to file for an extension on your behalf.  Try to avoid this by finding someone not as popular who may have the time to prepare and file your return before the deadline.

4.- You are overwhelmed with other things and have no choice but to put it off:  We all have times when unforeseen events mess with our best intentions.  I do not like encouraging people to put off the inevitable, especially when it may lead to additional taxes due because of interest and/or penalties. Sometimes, however, we have to pick between the lesser of two evils.  The worst thing you can do is to prepare your own return at the very last minute.  Undoubtedly, you will be under pressure.  And this is when most people take shortcuts, make mistakes, and overlook deductions.  So, my advice?

• Request an automatic extension of time to file your return.  And do it today.  Just because you request the extension doesn’t mean you have to use it.  But it will be there if you need it.  And the pressure will be off.

Michael Lohr is an independent financial planner and investment advisor with over 20 years experience. You may follow Michael Lohr on Twitter or e mail him at malcfp@hotmail.com