Last Minute Tax Tips on the Today Show

I was on the Today Show yesterday to share some very last minute tax tips with host Merideth Vieira. In case you missed the segment, I have included an embedded video of my appearance courtesy of TodayShow.com.

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Taxes: Are You Crossing the Line?

Most taxpayers who have not yet filed their returns with the IRS are probably feeling a lot of stress and pressure to beat tomorrow’s deadline. However, as Nicholas Narlis explains in this article for Washington Post.com, last minute filers need to be extra cautious to avoid taking undeserved credits and deductions.

Nowadays, the process of filing tax returns online makes the actual signing where you attest to the accuracy of each filing feel less eventful. But do not kid yourself: The magnitude of placing your own "John Hancock" on these documents is the trigger to your own smoking gun. You will be held responsible to the letter of the law for its contents regardless of who assisted in preparing those forms. There is good reason why tax authorities require all applicable parties to sign in ink.

Life is filled with similar dilemmas where a decision (or inaction) could produce a very positive or extremely negative outcome. Everyone has a different tolerance for risk vs. reward. Having a keener sense of where you stand and what could eventually end up on your personal life map is paramount to effective risk vs. reward management.

The essence of this particular dilemma lies in answering this initial question: Even if the upside appears to be a sure thing, can you afford to accept your fate in the event that the worse-case scenario of a life decision implodes on you? In other words: If you can’t do the time, then don’t do the crime in the first place.

You will not be the first (or last) person to think you will luckily escape drawing the short stick in being put to the test via a tax audit. All too often, you can lull yourself into thinking the ritual of doing your taxes is more than what it is. After all, it is expected that every law-abiding citizen will complete an accurate tax return each year. But somehow people lose proper perspective and in the process also lose their own purpose in life.

Continue reading at Washington Post.com…

9 Very Last Minute Tax Preparation Tips

April 15^th is just a few hours away, and millions of Americans are rushing to get their tax returns filed on or before this Thursday. To help any of my readers who are trying to beat the deadline, I have put together this list of tips to get your tax returns prepared on time.

1. Use your Tax Return from Last Year as a Guide

Before you start working on your new tax return you should go and find your tax return from last year. Unless your financial situation has changed drastically over the past year you should be able to use your old return as a guide for completing your new return.

2. To Itemize or Not?

Itemizing your return opens up the door for dozens of tax deductions, although taking the standard deduction is easier, itemizing your deductions may be more tax beneficial to you. If you do not know if you would benefit from itemizing or the standard deduction then you might want to speak with a qualified tax professional.

3. Consider an IRA to Lower your Liability

If you are looking for a last minute way to lower your adjusted gross income from last year, then you should consider making a contribution to a traditional IRA. As this article on the RDTC Tax Help Blog explains you can make retroactive contributions to an IRA up until the tax deadline to lower your taxable income for 2009.

4. Making Work Pay Credit

This year there is a new $400 Making Work Pay Credit for most taxpayers who worked during the last year. You will need to complete Schedule M to calculate the value of your credit. For more information checkout this IRS press release from earlier today.

5. Be Honest and Review Everything Twice

One of the most important rules of preparing a tax return is to always be honest. The repercussions you may receive for lying to get a deduction you do not qualify for could be a lot more than you would have saved. You should also give yourself time to thoroughly review your return for errors before filing.

6. E-Filing your Return

You should always try to e-file your tax return, unless you have a legitimate reason not to. E-filing is fast, and can get your return to the IRS in a few minutes. Plus, you can avoid both the drive to the post office and having to pay for shipping.

7. Direct Deposit / Splitting your Refund

When you file your return, even if you do not e-file, you can select to have your tax refund directly deposited into your bank account. You can even have the refund split between multiple different accounts.

8. Consider an Automatic Extension

If you are not quite ready to file – for any reason – you should file for an automatic extension from the IRS. There are numerous reasons you may feel the need to file an extension, but any reason is better than not filing your return at all. However, if you are going to owe the IRS money then you still need to have your payment to them by the 15th.

9. Get Professional Help

If you are confused, or worried about getting your return completed by the deadline then you might want to enlist professional help. However, if you are going to get help from a tax preparer then you will want to make an appointment as soon as possible. Even if you do file an extension, you should make an appointment to get your return completed shortly after the tax deadline as many tax preparation offices close during the off-season.

Reminders for Last-Minute Tax Filers

The IRS issued a new press release yesterday, offering some reminders for those last minute filers out there. Their tips include:

Don’t Miss the Deadline

If you have a balance due and don’t file a tax return by April 15, you face interest on the unpaid taxes as well as a failure-to-file penalty. Interest and penalties are added to your balance due. If you can’t file by the deadline, request an extension of time to file (see below).

If you file on time or request an extension but don’t pay all or some of the balance due by the deadline, you will incur interest on the unpaid amount and a failure-to-pay penalty. If you can’t pay the full amount, you should pay as much as possible by the deadline to minimize interest and penalties.

Get Recovery Tax Breaks

Last year’s American Recovery and Reinvestment Act created a full slate of tax breaks, which can be claimed on tax returns right now. These include:

• The Homebuyer Credit
• Making Work Pay Credit
• American Opportunity Credit
• Home Energy Credit
• New Car Tax and Fee Deduction

You can get information on these and other Recovery credits at IRS.gov/recovery.

File Electronically

Most tax returns are now filed electronically – either from home, using purchased tax software, or by a tax professional or through Free File.

There are several reasons the IRS encourages taxpayers to file electronically. Here are two big ones:

• E-file is accurate: Most available tax preparation programs check for errors and missing information, reducing the chances of delayed refunds or follow-up correspondence from the IRS.
• E-file is fast: With most tax software, you can file a state tax return at the same time you file your federal return. Once a return is accepted for processing, the IRS electronically acknowledges receipt of the return. And refunds take only about half the time of a paper return. If you choose direct deposit, you will get your refund in even less time.

Continue reading at IRS.gov…

Rushing to do Taxes? Avoid These 10 Last-Minute Mistakes

People all over the country are rushing to get their tax returns prepared and filed, and as Sandra Block of USA Today.com explains in this new article, when you hurry, you're more likely to make mistakes. She put together a list of 10 last-minute errors that could attract unwelcome attention from the IRS. I have included a few of the items below, but be sure to check out the full list at USA Today.com.

1. Incorrect Social Security numbers

In 1987, the IRS started requiring parents to provide Social Security numbers for children who were claimed as dependents on their tax returns.

If you omit Social Security numbers for any of your dependents — or use a wrong SSN — the IRS may disallow the exemption. You also could lose some valuable credits, such as the child tax credit, the child and dependent care credit and the earned income tax credit.

When you enter a dependent's last name, make sure it's the exact name that appears on the child's Social Security card. Likewise, if you got married and changed your name, make sure you notify the Social Security Administration before you file your taxes.

2. Incorrect bank account information

The IRS strongly encourages taxpayers to file electronically and arrange for direct deposit of their refunds. E-filing reduces errors and enables you to get your refund in a couple of weeks, vs. four to six weeks for paper-filed returns. But if you go this route, take extra care when you plug in your routing and account numbers. Otherwise, your money could end up in someone else's bank account.

3. Overlooking charitable contributions

Continue reading at USA Today.com…

Questions for the Tax Lady: December 21st, 2009

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 #1: I have a small business with a few employees. If I throw a holiday party for them can I write off the expenses?

Yes, the IRS will let you deduct all expenses related to throwing a holiday office party. You could also deduct the costs of presents for your employees, as long as you do not give out cash or items easily exchangeable for cash, such as stocks.

Question # 2: What are some last minute ways to lower my taxable income for the year?

There are lots of quick ways you can lower your taxable income without leaving your computer. First of all, you could make a charitable donation. The Hannah Rose Foundation, a cause near to my heart, accepts donations online. Just remember to print out your receipt. You could also make an extra mortgage payment, or order energy efficient appliances online. For a list of 10 ways to lower your tax liability in under 10 minutes, check out this article on the RDTC Tax Help Blog.

Top 10 Last Minute Tax Tips

The April 15^th tax deadline is just around the corner, and with everything else going on in the country right now there are millions of taxpayers that still need to prepare and file their income tax returns. To help those of you who are rushing around to finish before the tax deadline, I have compiled the following list of the top 10 last minute tax tips.

1. Make sure it is all there

Be sure you have attached all W-2’s and all necessary documents to your return, and have completed them correctly. Your social security is the most important identifying number, so check and double check that it is correct on all documents. It is also a good idea to put your social security number on the top of every form.

2. Check the IRS’ website

New deductions and credits are created every year, for your benefit. While we all like to think our tax preparers know everything, it never hurts to double check their work. The IRS updates their website frequently with all new tax laws, credits, and deductions.

3. E-File

If you are running short on time and cash, you can e-file (electronically file) your taxes on your own online. All the information you need is on the IRS website, and there are multiple help lines you can call for assistance. However, the sooner the better, as the IRS gets very busy this close to the tax deadline.

4. Be honest

The most important rule of filing your taxes is to always be honest. The repercussions you may receive for lying to get a deduction you do not qualify for could be a lot more than you would have saved. Check over your return one last time before sending it off to make sure you only claimed deductions and credits you qualify for.

5. Joint or separate

If you are married, take the time to see if filing joint will benefit you or not. Changing tax laws and situations may change which works best for you, so do not just assume you should choose the same thing you did last year. Also be sure to keep your spouse informed about potential changes. If you choose joint and they choose separate, or your info does not match, you may have an audit coming your way.

6. Make copies of everything

Before you mail in that return, be sure you have a copy of every single document and page you are sending. If you want to be extra safe then you might even ask the post office to give or send you a receipt so you have proof of post-mark. This will be your proof of filing if the IRS sends you an audit, or missing document letter, in the mail.

7. Use IRS mailing materials

The IRS sends you your own mailing materials for a reason – it makes the process easier for them. If you fail to use their documents to mail your return, you could be running the risk of receiving a later return. If details on the mailing materials are inaccurate, the IRS prefers you make changes right on the labels, in pen.

8. Not ready? File an extension.

If you are not quite ready to file, for any reason, definitely file for an automatic extension. There are numerous reasons you may feel the need to file an extension, but any reason is better than not filing your return at all. However, if you are going to owe the IRS money then you still need to have your payment to them by the 15^th.

9. Seek professional help

If you are new to filing your own taxes, or have recently changed filing status (i.e. newlywed, new business owner, new parent, etc.), then you may want to enlist some professional help. However, if you are going to get help from a tax preparer then you will want to make an appointment as soon as possible. The closer to tax day it gets, the busier the tax preparer’s office is going to be.

10. Check your math

Last but not least, always double check your math. It is much easier to make numerical errors than grammatical ones, so go over each and every number before you seal the envelope. It may seem like a hassle, but trust me it is much better to notice your own errors then to have an IRS auditor point them out.