Friday, April 17, 2009

How to Avoid an Extension in 2010

Wednesday was the tax deadline and thousands were scrambling to request an automatic extension from the IRS. Although you will not be penalized for filing a tax extension – as long as you pay all required tax liabilities – it is a good idea to get in the habit of getting your return prepared and filed before April 15th. By planning ahead, there are plenty of easy things you can do now to prevent the need for a tax extension in 2010.

1. Organize your documents

By keeping your tax documents in one place throughout the year you will always be one step ahead of the game. As you get closer to next tax season, begin to review your financial documents and make sure you have everything you will need to do the actual filing. You could even make yourself self a tax checklist, to make sure you do not forget anything.

2. Start early

Start the compilation, organization, and calculation process as soon as you can. All tax forms are available on the IRS’ website year-round, so it’s never too early to begin. In addition, you should start receiving all income and expense statements from third-party reporters (e.g. employer, bank, investments, etc.) by mid January. The sooner you start, the more you can spread out the task, making it easier to do. Depending on how complicated your return is, you could do a little bit every week leading up to the deadline.

3. Make estimated payments

If you are self-employed, or a small business owner, then you need to make quarterly or monthly estimated tax payments. Never evade these necessary taxes, as the penalties will be far worse come tax season—especially if you did not pay enough during the year. If you make enough through your self-employment, then you might want to consider having a professional help calculate your quarterly payments to make sure you are always ahead of the game.

4. Have Internet available

Having a computer with Internet capability will also help immensely during tax season, because you can use it to easily research tax information. You may be surprised how much information about taxes there actually is online these days. Instead of calling up your accountant or tax preparer every time you have a question, try doing a Google search to see if you can find the answer online. Or visit my company’s blogs at and

5. Determine if you will need help

Never be too shy to enlist a little professional help if you are not fully about preparing your tax returns by yourself, or simple do not have the time to do so. Determining early on whether or not you plan to hire help will allow you to take your time choosing the right tax prep specialist or accountant for you. You may also be able to get a better deal, as many tax preparation offices run specials early during tax season.

6. Change your withholdings

If your payroll withholdings are off, then it can make things more difficult when you go to prepare your returns. Moreover, there is nothing worse then being surprised to learn you owe the IRS a huge tax payment come April 15. If you have been over or underwithholding throughout the year, by adjusting your withholdings now, you can make things easier for yourself come next tax season.

7. Find more deductions, make adjustments

Many people put off filing their taxes because they are scared of paying up any money they might owe the IRS. To offset what may be a big payment, take the time now to carefully research the current tax laws to see what deductions you qualify for. If you have already claimed all available credits and deductions, then see if there are any small adjustments you can make in your life to claim some that you may not have qualified for this year.

8. E-file

A lot of people simply do not want to drive to a tax preparation office to file their returns. If you prefer to do things from home, you could try e-filing this year, or look into over-the-phone services. If you have all your info together, both options are quick, easy, and can prevent you from needing to file an extension.

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