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Entries in Filing (11)

Wednesday
Apr042012

IRS Taxes: Late Filers Can Avoid Costly Mistakes

iStockphoto/Thinkstock(WASHINGTON) -- The April 17 tax deadline is rapidly approaching, and millions of people wait until the very last minute to file.

But what happens if you can’t file your 2011 returns on time or pay your taxes?

The IRS says don’t panic. But the worst thing you can do is to simply ignore the deadline.

“Even if you owe money and you don’t know how you’re going to be able to afford to pay that balance due, first and foremost file your taxes,” says Kathy Pickering, executive director of the H&R Block Tax Institute.

“You can work out a payment plan with the IRS.” You may incur some interest or some payments, she says, but the penalties are far worse if you don’t file.

Automatic extensions are available to taxpayers who need more time to finish their returns. But remember: this is an extension of time to file; not an extension of time to pay.

“What you can do is just file without even paying your taxes and they’ll contact you,” says Pickering. The IRS will send you a letter “and you can work out a payment plan then.”

Taxpayers will avoid stiff penalties if they file either a regular income tax return or a request for a tax-filing extension by this year’s April 17 deadline.

People who haven’t finished filling out their return can get an automatic six-month extension. The fastest and easiest way to get the extra time is through the free file link on IRS.gov. Use form 4868.

By properly filing this form, a taxpayer will avoid the late-filing penalty, normally five percent per month based on the unpaid balance that applies to returns filed after the deadline.

Last month, the IRS introduced the Fresh Start program for people who are out of work.

“If you’ve been unemployed for 30 days or more, whether in 2011 or 2012, you can have until October 15th to pay your taxes in full and they won’t assess the failure to pay penalty,” says Pickering. “I think it’s going to be a good program for some people.”

Some taxpayers get more time to file without having to ask for it. These include: taxpayers who live and work abroad, as well as members of the military on duty outside the U.S. They have until June 15 to file. Tax payments are still due April 17.

Members of the military and others serving in Iraq, Afghanistan or other combat zones can wait at least 180 days after they leave before they have to file or pay taxes.

People affected by certain tornadoes, severe storms, floods and other recent natural disasters may have until May 31 to file and pay. If this may be you, find out more information at the official website IRS.gov.

Copyright 2012 ABC News Radio

Tuesday
Mar202012

Online Tax Prep: Is It Cheap and Safe?

iStockphoto/Thinkstock(NEW YORK) -- Online tax tools -- many offering free advice -- can make filing your return this year a breeze.  But beware: People who file online should heed two cautions.

First, the price you'll pay to file for online tax prep programs may be higher than the one that's advertised.

Second, after you have filed, be sure to take precautions to protect yourself against identity theft.

All the major online tax-help providers, including household names such as TurboTax and H&R Block, offer comparable services at comparable advertised prices.  Each website gives you the option of buying tax software and then downloading it (so you can file a printed return); or of using the website to do your return entirely online.

For example TurboTax, for a basic federal return, quotes a price of $29.95 to download and $19.95 to file online.  If you choose the latter option, most sites don't bill you until the very end of the filing process, after you've entered your data and completed your return.

But between start and finish, added fees can accrue.  Some sites, for example, try to up-sell you additional services and features -- like audit or fraud protection -- without always making clear that you'll be charged extra for them at checkout.

Filing state taxes also costs you more -- sometimes much more -- a fact that's easy to overlook on some sites.  And more complicated returns -- ones involving, say, itemized deductions or personal businesses -- may incur higher fees.

Sneaky?  Not at all.  Anybody who reads the websites carefully at the outset understands that he or she can wind up paying more than the promoted price.  Still, if you file online, you aren't told the total cost until you've done all the work and entered all your data, which makes you something of a hostage to the process.

Enter new, flat-fee providers such as TaxSlayer and OnePriceTaxes.

OnePriceTaxes, as its name implies, charges a single flat fee, regardless of whether the filer's return is simple or complex.  Total cost is disclosed up-front, and there are no hidden fees.  There's also no extra charges for the efiling of state taxes.

On OnePrice, a federal or state return costs $9.95.  A federal and state return, combined, cost $14.95.

If you do opt to efile, take a few precautions to make sure you don't leave your data vulnerable to identity thieves.

If you file the old fashioned way -- on paper -- then you'd want to shred tax documents you no longer need. Also do the same with your electronic documents.

For Apple users, says security consultant Securosis, that's easy: Macs come with what amounts to a built-in shredder, "Secure Empty Trash," listed in the Finder menu.  By selecting it, you overwrite your data, making recovery of it by thieves all but impossible.

PC users can delete a document and then empty their recycle bin.  For greater security, they can buy document-shredding software, such as Erasure or File Shredder, that overwrite their data.

Any tax documents you want to retain should be stored, says the Identity Theft Resource Center, on a password-protected USB thumb drive or external hard drive.  Drop these in a safe deposit box or put them in your home safe.

Copyright 2012 ABC News Radio

Friday
Feb102012

Tax Tip: Preparing and Filing Your Taxes for Free

iStockphoto/Thinkstock(NEW YORK) -- The majority of U.S. taxpayers are eligible to have their tax returns filed for free, which begs the question: Why pay money for for tax preparation software?

"If your income is about $57,000 or less, there's a good chance you can qualify to file your return electronically and do it for free," explains Eric Smith with the IRS. "That profile fits about 70 percent of American taxpayers."

The IRS offers a service called Free File that uses brand name tax preparation software. Taxpayers choose which program they want to use, then follow the instructions.

"You enter information from W-2s and 1099s, but you also answer questions that can help the program help you determine which deductions and credits you qualify for," Smith says.

Depending on the state you live in, you might also get Free File to do your state taxes, as well.

And taxpayers seem to like it. The IRS says 98 percent of people who use Free File would recommend it to a friend. 

Copyright 2012 ABC News Radio

Wednesday
Feb082012

Tax Tip: Know Your Filing Status

Creatas/Thinkstock(NEW YORK) -- When you fill out your 1040 form this tax season, you will need to choose your filing status. Depending on which box you check, the choice could wind up costing you a lot of money.

H&R Block's Kathy Pickering gave one woman's story: "She was a single woman who was caring for a number of kids, some nieces and nephews full time, and she had filed as a single filing status whereas had she filed head of household, she would have had a more favorbale status."

Accountants say it's a good idea to run the numbers if you fall under more than one filing status. For instance, many married couples wonder whether it makes more sense to file separate returns than filing a joint 1040.

As Eric Smith with the IRS explains, only about 1 or 2 percent of married couples find filing separately works better for them.

"There are some deductions and credits that are not available if you file separately, but only are available if you file jointly, so that's another consideration," he says.

Copyright 2012 ABC News Radio

Thursday
Apr072011

Tax Tip: Some Important Tax Forms Will No Longer Be Mailed

Comstock/Thinkstock(NEW YORK) -- More than ever, tax prep is going online, and with that comes changes to what you would normally receive in the mail.

"Certain things will no longer be in the mail," says Mary Beth Franklin of Kiplinger's Personal Finance magazine.  "If you're waiting for your IRS tax forms to arrive in the mail it's going to be a really long wait, because this is the first year that the IRS will not automatically mail forms to taxpayers."

Franklin says, "You can still get printed copies if you want at participating libraries and post offices or you can go to IRS.gov and download them."

If you need help with these forms or with e-filing, your local library may be a good place to go.

Most taxpayers now file electronically, not through the mail -- just one reason why the IRS is also changing with the times.

Copyright 2011 ABC News Radio

Friday
Apr012011

Countdown to Tax Day: More Taxpayers Filing Online

Comstock/Thinkstock(NEW YORK) -- Just three more weekends remain before the tax filing deadline -- April 18 -- and now more than ever, taxpayers are choosing to file online.

This will almost certainly be the first year that more than 100 million people have used the IRS' e-file service.

"E-filing is now the norm," says Mary Beth Franklin of Kiplinger's Personal Finance magazine.

But if you still haven't done your taxes yet and are looking to mail them in, the forms you need are still available.

"You can still get printed copies if you want at participating libraries and post offices or you can go to IRS.gov and download them," Franklin says.

One big reason to e-file: the software helps you avoid simple mistakes.

"The software will fill in the appropriate tax forms; it will check your math for basic computations," says Franklin.

Copyright 2011 ABC News Radio

Friday
Mar042011

Tax Tip: Check Your Return Carefully Before You Send It

Duncan Smith/Getty Images(NEW YORK) -- It's the little things that can trip you up when filling out a tax return.

"It's always best to make an early start on your tax returns," said Eric Smith of the IRS. "That's because people who wait until the last minute are much more likely to make mistakes," which can lead to delays and questions from the IRS about your return.

After filling out the forms, Smith advises that you "put the return aside for a day or two, maybe check it over with kind of a fresh perspective, and then you're in a much better position to say 'hey, you know something's missing here' or 'something's not missing, I'm ready to go.'"

Check more than just income and deductions, says Kathy Pickering of the tax firm H&R Block.

"Make sure your Social Security number is right, that your children's social security numbers are right, that your name is spelled correctly."

Doing your returns early may also be less stressful.

Copyright 2011 ABC News Radio

Monday
Feb212011

Tax Tip: Where to Get the Best, Cheapest Online Advice

Photo Courtesy - Getty Images(NEW YORK) -- The Internet is filled with tax advice -– some of it good, some of it just a big advertisement. The first place to look for good tax advice is on the Internal Revenue Service’s website.

“IRS.gov has a wealth of information,” said Jodie Reynolds of the IRS. “We have earned income tax credit calculators, we've got withholding calculators, if you have tax law questions.”

Accountant Janice Hayman says that's where she sends some of her clients.

“I am constantly surprised with their updates,” Hayman said. “They have wonderful features now.”

Many tax preparation companies also have their own websites, and most will answer some of your tax questions. Their main goal, however, is to sell their product.

“We have a lot of additional tax tips and information,” said Kathy Pickering, referring to her company’s site, HRBlock.com. “We've got calculators, and of course, that's where you would go if you want to prepare your taxes yourself.”

Copyright 2011 ABC News Radio

Wednesday
Feb092011

Tax Tip: Using Filing Software? Make Sure It's Up To Date

Photo Courtesy - Getty Images(NEW YORK) -- A growing number of taxpayers are becoming increasingly comfortable using computer software to file their returns.

“It’s going to guide you through it, help you find things that you might not have thought of on your own, and have all of the checks in there to make sure that your math is accurate,” said H&R Block’s Kathy Pickering.  “You’d be surprised how many people make simple math errors.”

Proponents of tax-filing software say it’s easy to file electronically.

“If you choose direct deposit as well, that’s when you can get your refund in as few as 10 days,” said Jodie Reynolds at the IRS.

A note of caution: because last year’s tax bill was passed so late, many software makers were forced to ship their products before all the tax code was written.  Make sure to update your software before filing your claim.

Copyright 2011 ABC News Radio

Tuesday
Feb082011

Tax Tip: Before All Else, Prepare the Necessary Paperwork

Photo Courtesy - Getty Images(NEW YORK) -- When it comes to filing your taxes, take the Boy Scout motto and be prepared. As you begin to get your paperwork together for your 2010 taxes, it may help to first look at your 2009 tax return.

“Seeing what your sources of income were and what type of deductions you had,” can give you a ballpark of what to expect this year, accountant Janice Hayman said.

Another tip? Make sure you have the right documents for both sides of the ledger.

“You say, ‘Here's how much I’ve earned’ and then you say ‘Here are the deductions that I can take to reduce my taxable income,’” said H&R Block’s Kathy Pickering.

Obtain your W-2 forms from all of your employers, your bank and investment statements, and any paperwork to support your deductions.

Note that it’s possible not everything will come in the mail, according to Kiplinger’s Mary Beth Franklin.

“As more and more of us are receiving documents electronically, certain things will no longer be in the mail. So make sure you're reading your e-mail inbox as well for those important documents.”

Copyright 2011 ABC News Radio







ABC News Radio