Tax Tips for Last-Minute Filers
Back when most people filed their taxes by mail, post offices offered extended hours—and sometimes live entertainment—on April 15 to accommodate anxious taxpayers who waited until the last minute to file their returns.
SEE ALSO: 9 Surprising Things That Are Taxable
These days, post offices are a lot quieter on Tax Day because most taxpayers file electronically. But even if you file from the comfort of your own home, the annual tax deadline is no less hectic or stressful if you got a late start. Some advice:
Don’t Panic if You Don’t Owe
If you, like most taxpayers, are due a refund, there’s no penalty for filing after April 15. That’s because late penalties are based on the amount you owe the IRS. The main drawback if you don’t file on time is that you’ll have to wait longer for your check from the IRS—all the while risking losing your refund to tax ID theft.
There are a few instances that require on-time filing even if you don’t owe. For example, if you converted a traditional IRA to a Roth in 2013, you have until Oct. 15, 2014, to undo the conversion and avoid paying taxes on it—but only if you file your 2013 return by April 15 or request an extension.
Consider Filing an Extension if You Do Owe
To request an extension, file Form 4868. You can do it by phone, online or by mail. An extension will automatically extend your filing deadline until Oct. 15. Keep in mind, though, that while an extension gives you more time to file, it doesn’t give you more time to pay.
If you can’t pay in full by April 15, consider an IRS installment plan, which will allow you to make monthly payments. You’ll have to pay a set-up fee of $120 ($52 if you arrange for automatic debit from your bank account), an interest rate that’s adjusted quarterly (currently it’s 3%) and a monthly 0.25% late-payment penalty. (More information from the IRS on payment plans is available at this link.)
If you can’t pay what you owe, you still should file a tax return or an extension by April 15. You’ll owe underpayment penalties of 0.5% a month of the unpaid balance, up to 25% of the amount you owe, plus interest. But if you pull the covers over your head and ignore the filing deadline entirely, you’ll rack up steeper failure-to-file penalties: 5% a month, up to 25% of the balance.
Whether or not you can pay right away, giving yourself more time to file will reduce the likelihood that you’ll make common mistakes, such as using incorrect bank account numbers for direct deposit, which could cause your refund to land in someone else’s account. Good luck recovering your money if that happens.
You may need to request an extension from your state, too. Some states automatically grant an extension if you request one from the IRS, but others require you to file a separate document. Check with your state tax department for more information.
In Your Rush, Don’t Overlook Big Tax-Saving Deductions and Credits
If you’re determined to file by April 15, one of the easiest ways to avoid overlooking tax breaks is to review last year’s tax return for similar deductions you can claim on your 2013 return, says Greg Rosica, contributing editor to the EY Tax Guide 2014. Go over the income section of your 2012 tax return, too, to make sure you haven’t overlooked 2013 income reflected in a missing 1099 from your bank or other financial institution.
Not bothering to itemize? Don’t assume you’re ineligible for tax breaks.
Don’t Sweat the Small Stuff
Don’t waste time—and distract yourself from bigger potential write-offs—documenting deductions you probably won’t be able to claim anyway. For example, it’s unlikely you’ll be eligible to deduct your out-of-pocket medical expenses. That’s because you must itemize to claim this deduction, and you can only deduct unreimbursed medical expenses that exceed 10% of your adjusted gross income (7.5% if you were 65 or older on Dec. 31, 2013).
Ditto for charitable contributions if you’re not itemizing. Unless you were extraordinarily generous in 2013, you probably won’t have enough itemized deductions to exceed the standard deduction, which is $6,100 for single taxpayers under age 65 and $12,200 for married taxpayers who file jointly.