Oh tax season – what a great time of year. Accountants are nestled down in their bunkers, drinking pots of coffee and sleeping two hours a night, while taxpayers are running around frantically trying to find every last receipt.
These are joyous times. And with less than a month to go til the April 15 deadline, it’s important to remind ourselves that tax season doesn’t have to be stressful.
Here are some helpful tips to ease the stress and make these next few weeks as painless as possible.
1. Don’t Procrastinate
Ok, so I’m a total hypocrite here (I haven’t started gathering my tax info yet), but I can already feel the anxiousness looming. I need to get going before I create added stress in my life.
You and I both need to resist the temptation to put this stuff off til the last minute. Waiting too long to file your taxes not only increases your stress, but also increases the chances for committing tax-filing mistakes!
Procrastination is also one of the major roadblocks to reaching other financial goals as well, so we need to fight through that temptation and get in gear.
So, let’s make it a point to get crackin’ on our tax documents, gather the necessary info, fill out the data sheets that our accountants sent us (or if you are filing taxes yourself – gather the info needed to run through your program) and stop putting this off.
2. File Your Return Electronically
Interestingly, according to the IRS, two out of three tax returns were filed electronically last year. E-filing lowers the error rate on your return and taxpayers receive a nice, quick acknowledgement that the IRS received the return, which paper filers don’t get.
When you are running short on time, e-filing is a great way to expedite your return, ensure you’ve got the proper documentation needed, and get your tax refund faster. You can e-file through your tax preparer or commercial software. See IRS.gov for more information on Free File – a service providing free tax filing for eligible taxpayers.
3. Don’t Panic
Inevitably there will be one or two of us who perhaps made more than we thought last year, didn’t estimate our quarterly payments high enough or simply didn’t withhold enough.
So, what do you if you find yourself in a situation where you owe more tax than you can pay? Well, number one – don’t panic. Let’s consider the options rationally and make a good decision here.
The temptation is to take the path of least resistance and avoid the mess by not paying and hoping they won’t say anything. Don’t do that!
If you cannot pay the full amount of taxes you owe by the April 15th deadline, you should pay as much as you can to avoid penalties and interest.
You don’t want to make Uncle Sam the enemy here. You should also reach out to the IRS to discuss any payment options. Their number is 1-800-829-1040.
Uncle Sam might be able to provide some relief such as a short-term extension to pay, an installment agreement or an offer to compromise.
According to the IRS website, more than 75 percent of taxpayers eligible for an Installment Agreement can apply using the Web-based Online Payment Agreement application available on IRS.gov. To find out more type “Online Payment Agreement” in the search box on the IRS homepage.
4. Request an Extension to File – But Pay on Time
Let’s say the two minute warning goes off and you realize that you’re not going to be able to get the filing done by the April 15 deadline. What should you do?
You can request an automatic six-month extension to file until October 15. However, it’s important to remember that this extension of time to file does not give you more time to pay any taxes due. This is a big mistake folks make in thinking that an extension to file means they don’t have to pay right now.
The rule is that if you have not paid at least 90 percent of the total tax due by the April deadline you may also be subject to an Estimated Tax Penalty.
If you need to file an extension, use Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.