Jill On Money: Last minute tax tips
Tick-tock…the tax filing deadline is coming up and if you are either a procrastinator or someone who has delayed filing because you owe Uncle Sam money, it’s time to get going!
As a reminder, this year’s tax filing deadline is April 18, because we now recognize the Emancipation Day holiday in the District of Columbia.
Here are six tips to help you out:
1. File electronically: IRS efile is available to all taxpayers and many can e-file individual tax returns for free. Electronic filing is the safest, fastest, and easiest way to submit individual tax returns.
2. Check, double check, triple check: Most tax filing errors are preventable by simply checking Social Security numbers for each person listed on the return, double-checking refunds or balances due, and triple checking signatures and mailing addresses, if you are mailing a return.
3. File or request an extension of time to file: If you can’t get your act together by April 18, you are not off the hook. You must request an extension to file with Form 4868. An extension gives you until October 17 to file your tax return, but importantly, an extension to file is not an extension to pay. That means you need to estimate and pay any owed taxes by the April 18 deadline to avoid any potential penalties and interest.
You can also get an extension by paying all or part of your estimated income tax due. Use Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card and be sure to indicate that the payment is for an extension. Making a payment will mean that you won’t have to file a separate extension form and you will receive a confirmation number for your records. (One note about EFTPS – you need to enroll and receive a PIN, which can take about a week.)
4. Extend, then contribute: While you may have extra time to file your extension, the deadline to make IRA and Roth IRA contributions for 2021 is still April 18th. However, those with self-employment income who utilize SEP-IRAs have until the October 17th extension deadline to contribute.
5. Don’t freak out if you can’t pay: You are not the first person who has run up against this issue. The IRS has a few different options to consider for making a payment.
— Short-term payment plan: You can request additional time to pay through the Online Payment Agreement application. For no fees, the IRS may grant up to 120 days more to pay the bill for those who owe less than $100,000 in combined tax, penalties, and interest.
— Long-term payment plan: You can apply for an IRS installment agreement, which will put you on a longer-term monthly payment plan if you owe $50,000 or less in combined tax, penalties, and interest. However, going this route involves fees. If you pay monthly through automatic withdrawals, there is a $31 setup fee ($130 if you don’t use direct debit), plus accrued penalties and interest, until the balance is paid in full.
— Credit or debit card: While it may seem easier that the two other options, using a card may be the most expensive way to pay taxes, due to the fees associated with plastic.
6. Use the IRS.gov website: Reaching a human being at the IRS is about as likely as hitting the lottery. In the Taxpayer Advocate’s 2021 Report to Congress, there was acknowledgment that amid massive budget and staff reductions at the IRS, its level of service has dropped significantly. Last year, the agency’s customer service representatives only answered 11 percent of the 282 million telephone calls received.
(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at firstname.lastname@example.org. Check her website at www.jillonmoney.com)
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