HOW TO AVOID TAX TIME
PROBLEMS
Are you looking for ways to avoid the last-minute rush for doing your taxes?
Here are some stress-relieving ideas to help you.
- Don’t Procrastinate - Resist the temptation to put off your
taxes until the very last minute. Hurrying to meet the filing deadline may
cause you to overlook potential sources of tax savings and will likely increase
your risk of making an error.
- Visit the IRS Online - In fiscal year 2006, there were more
than 193 million visits to IRS.gov and 1.3 billion page views. Anyone with
Internet access can find tax law information and answers to frequently asked tax
questions.
- File Your Return Electronically - More than 70 million
taxpayers filed their returns electronically in 2006. Aside from ease of filing,
IRS e-file is the fastest and most accurate way to file a tax return. If you’re
due a refund, the waiting time for e-filers is half that of paper filers.
- Don’t Panic if You Can’t Pay - If you can’t immediately pay
the taxes you owe, consider some stress-reducing alternatives. You can apply for
an IRS installment agreement, using our new Web-based Online Payment Agreement
application on IRS.gov. This new Web-based application allows eligible taxpayers
or their authorized representatives to self-qualify, apply for, and receive
immediate notification of approval. You also have various options for charging
your balance on a credit card. There is no IRS fee for credit card payments, but
the processing companies charge a convenience fee. Electronic filers with a
balance due can file early and authorize the government’s financial agent to
take the money directly from their checking or savings account on the April due
date, with no fee.
- Request an Extension of Time to File – But Pay on Time - - If
the clock runs out, you can get an automatic six month extension of time to file
to October 16. The extension itself does not give you more time to pay any taxes
due. You will owe interest on any amount not paid by the April deadline, plus a
late payment penalty if you have not paid at least 90 percent of your total tax
by that date. See IRS Form 4868, Application for Automatic Extension of Time to
File U.S. Individual Income Tax Return for a variety of easy ways to apply for
an extension. Taxpayers needing Form 4868 should act soon to be sure they
have the item in time to meet the April deadline.
ITEMIZERS CAN DEDUCT CERTAIN
TAXES
You may be able to deduct certain taxes on your federal
income tax return. You can receive these deductions if you file Form 1040 and
itemize deductions on Schedule A. Deductions decrease the amount of income
subject to taxation.
There are several types of deductible non-business taxes:
- State and local income taxes: You can choose to claim a
state and local tax deduction for either income or sales taxes on your return.
You can deduct any estimated taxes paid to state or local governments and any
prior year's state or local income tax as long as they were paid during the tax
year. If deducting sales taxes instead, you may deduct actual expenses or use
the optional tables provided by the IRS to determine your deduction amount,
relieving you of the need to save receipts. Sales taxes paid on motor vehicles
and boats may be added to the table amount, but only up to the amount paid at
the general sales tax rate.
- Real estate taxes: Deductible real estate taxes are usually
any state, local or foreign taxes on real property. If a portion of your monthly
mortgage payment goes into an escrow account and your lender periodically pays
your real estate taxes to local governments out of this account, you can deduct
only the amount actually paid during the year to the taxing authorities. Your
lender will normally send you a Form 1098, Mortgage Interest Statement, at the
end of the tax year with this information.
- Personal property taxes: Personal property taxes are
deductible when they are based on the value of personal property, such as a boat
or car. To be deductible, the tax must be charged to you on a yearly basis, even
if it is collected more than once a year or less than once a year.
- Foreign income taxes: Generally, you can take either a
deduction or a tax credit for foreign income taxes, but not for taxes paid on
income that is excluded from U.S. tax.
More information is available at IRS.gov. IRS forms and publications can be
downloaded from the Web site or obtained by calling 800-TAX-FORM
(800-829-3676).