Sunday, April 15, 2012

Last Minute Tax-Filing Tips


Guest Post by Andrea Woroch
Are you a tax procrastinator? Then you're part of a non-exclusive and expensive club. A survey by TechBargains.com found last-minute income-tax filers pay nearly double over those who file earlier in the year. That's better, however, than those who file late or don't file at all.
The IRS makes a significant distinction between taxpayers who fail to file and those who fail to pay any outstanding tax debt. The penalty for "Failure to File" is more expensive, at 5 percent of the outstanding tax bill per month until the return has been filed. Though this amount is capped at 25 percent, other penalties like "Failure to Pay" may come into play, charging an additional 1 percent of the outstanding tax bill per month.
So what can you do to avoid these fees and headaches?
When Filing Electronically
There's a selection of cheap and easy online tax software, like TurboTax or those linked to on the IRS site. Even if you owe money you can't pay, file now to avoid fees. Then contact the IRS to figure out a payment plan or fill out the Installment Agreement Form for the outstanding debt.
When Filing By Mail
You can still file and pay on time, if your forms are postmarked with an April 17 date, so hoof it down to the post office by the close of business on Tuesday. Don't put it off until too late, however, as the lines can be overwhelming.
When You Should File an Extension
If you have a complicated tax return or find yourself in a new financial situation, consider filing an extension to give yourself extra time. You don't want to miss any available deductions, so it pays to take your time. File Form 4868 for a six-month extension. Outstanding tax debt is still due April 17, however, so pay as much as you think you owe to avoid the Failure To Pay fee.
When You Need Payment Options
If you don't have funds to cover the entire outstanding debt, the IRS offers various payment options and can work with you to set up a plan. You may qualify for a plan under the recently launched Fresh Start Initiative, which offers an installment agreement or a six-month grace period depending on specific circumstances, including being unemployed, going through bankruptcy, or owing over a certain amount.
WHAT TO DO WITH A REFUND
If you're one of the lucky Americans getting a refund this year, you can get the most from your money by following these tips.
Pay It Down
Pay off some or all of the debt on your high-interest credit cards. You can also make an extra payment on the principal of your mortgage. Do this just once a year and you could save tens of thousands of dollars on the back end of your mortgage.
Save!
Open an online savings account for better interest rates and a better return on your money. The most popular online bank is ING Direct, but there are several more that offer high interest rates.
Prepare For Emergencies
Lightning strikes all of us at one time or another, so it's wise to establish a fund that will provide the necessary cash when emergencies arise.
Spend It Wisely
If you're lusting after a big-ticket item, like a big-screen TV, use your refund towards this purchase, rather than putting this expense on a credit card or taking out a loan. And don't just throw down your hard-earned cash without searching for coupons first. If it's electronics you covet, you can find great deals on FreeShipping.org from TigerDirect and other online e-retailers.

Andrea Woroch is a nationally-recognized consumer and money-saving expert who helps consumers live on less without radically changing their lifestyles. From smart spending tips to personal finance advice, Andrea transforms everyday consumers into savvy shoppers. She has been featured among top news outlets such as Good Morning America, NBC's Today, MSNBC, New York Times, Kiplinger Personal Finance, CNNMoney and many more. You can follow her on Twitter for daily savings advice and tips.
For all media inquiries, please contact Andrea Woroch at 970-672-6085 or email andrea@andreaworoch.com.
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