Taxes 2011: 3 Quick Tax Tips to Avoid IRS Hassles During Tax Season…
(ThyBlackMan.com) Even though most people consider tax season to be a major pain, there are some basic ways to ease your tax frustrations — lowering the amount you fork over to Uncle Sam, and warding off potential tax problems in the process.
Here are 3 quick tax tips to help you accomplish all these things for the 2011 tax season:
When you owe the IRS, the penalty for failing to pay is 0.5% of your unpaid taxes per month, up to a maximum of 25%.
However, the penalty for failing to file is 10 times worse: it’s 5% of your unpaid taxes per month, up to a cap of 25%.
So it’s far less costly to go ahead and file, even if you don’t have the cash on hand to satisfy your tax bill in full.
Besides, those who owe the IRS have options: like payment plans or an offer-in-compromise. So at the very least, you should file on time or file IRS form 4848 to get an automatic six-month extension if you can’t file your taxes by the April 18, 2011 deadline. Even with an extension, however, you still have to pay what you owe by the April 18 deadline. Otherwise, you’ll get hit with interest and possible penalties. An extension gets you more time to file, not more time to pay.
2. It pays to file a tax return — even if you’re not required to do so:
In addition to the folks who don’t file because they can’t pay, some people don’t file a tax return because they don’t have to. But even if you aren’t legally required to file a 1040 (if, say, your 2010 income fell below a certain amount — $9,350 for single taxpayers or $18,700 for married couples), it could still make sense to file because you may be entitled to a refund. In fact, the IRS said in 2010 that it was holding roughly $1.3 billion in unclaimed money due to approximately 1.4 million taxpayers who didn’t file federal income tax returns back in 2006.
3. Take advantage of speedy, last-minute moves:
– Use up your flexible spending accounts (many company plans let you do this through March 31st. But starting Jan. 1, 2011, over-the-counter medicines must have a prescription).
– Contribute to a traditional IRA (through April 18, 2011) or a SEP IRA (through October 17, 2011, with an extension). Those under age 50 can put in as much as $5,000; people 50 and older can contribute $6,000. Just be sure to specify that the funds be designated as a 2010 contribution to get the immediate tax benefit.
– E-file instead of going the old-fashioned paper, pen and mail route. E-filing is the speediest, simplest, most accurate way to get those taxes done on time.
By using these and other money-saving tax tips, you’ll find that tax season doesn’t have to produce big headaches after all.
Written By Lynnette Khalfani-Cox
Official website; http://askthemoneycoach.com/