Wednesday, March 09, 2011

Questions for the Tax Lady: March 9th, 2011

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: Roni, I saw your press release last week on advice for celebrities on how to avoid tax debt problems. Do you have any simple tips for those of us not living in Hollywood?

Answer: Of course! While my tips for celebs certainly apply to everyone, there are so many tax tips for John Q Public. Here are my favorite tips to avoid trouble with the IRS:

  1. Pay your taxes. Whether you are a W-2 employee, an independent contractor, or a business owner, you have to pay taxes. If you are an employee, make sure you are withholding enough from your paycheck to pay Uncle Sam. If you are an independent contractor or business owner, make sure you are making your quarterly estimated tax payments. This simple tip would save thousands of people a year from tax trouble.
  2. If you aren’t sure about something on your taxes, ask for help! Too many people claim tax breaks that they aren’t entirely sure about, and you know what? The IRS figures it out. It might take a while, but they will eventually notice and when they do, it’s going to be unpleasant.
  3. Double check your tax return. I cannot tell you how many people wind up with tax troubles because of careless errors on their tax returns. A math error, transposing digits, sloppy documentation… any of these things can cause your tax return to be incorrect, and can leave you with a nasty tax debt.

2. If I file an automatic extension with the IRS today will it give me six more months to file my return from today or six months from April?

Answer: Every taxpayer is entitled to a six month extension. You must file the extension before April 18 (remember, because of a Washington DC holiday, you get three more days to file this year!), but regardless of when you filed the extension, your new tax filing deadline will be October 18.

Quick reminder, a filing extension is not an extension of time to PAY. If you know you will owe when you file, you are still required to make that payment by April 18.

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