Panicking because you aren’t ready for tomorrow’s tax deadline? Here are some last-minute tips to make the process a little less painful. To get all the deductions you deserve and plenty of tax planning and prep advice, check out my book Tax Tips for Authors.
1. Didn’t get organized in time? File an extension. If you haven’t got your expenses tallied in time to get all the deductions on your Schedule C, don’t worry. You can file an extension until October 15, which gives you six months to get your act together. Most tax software has an extension option, or you can go to the IRS website and download the PDF. Fill it in and mail it on April 15. The caveat here is that the IRS expects you to pay what you owe now, even if you haven’t figured it out! If you have a refund coming, don’t worry, you don’t have to do anything. But if you have a balance due, or you aren’t sure, make sure that between withholding and other tax payments that you pay as much as your tax liability from LAST year. Then you won’t get an IRS penalty. You may owe interest on the difference, but it’s far less.
Tax liability is on Line 61 of Form1040 for last year.
2. Owe money and you can’t pay it? That’s not as big a problem as it sounds. Go ahead and file your return on time, and send what you can afford now. The IRS is happy to send you a bill for the remainder, and that letter will have instructions for setting up a payment plan. You can take up to 5 years to pay any balance due, at a monthly payment that’s affordable for you. Remember: the penalty for NOT filing is 5% of the balance due per month, up to 25% of the amount you owe. But the penalty for paying late is only 0.5%, just one-tenth of that amount. File, then figure out how to pay later and you will save yourself a lot of money.
3. Realized you forgot to claim something after you filed or missing a vital receipt? Not a problem. You can file an amended return up to three years after the due date. For 2012 you have until April15, 2016 to correct anything you forgot to deduct. You’ll file a Form 1040X for the specific year you need to correct, after you’ve redone your return with all the deductions you are entitled to.
4. Want to reduce your 2012 tax liability? The only way to fix what you owe for 2012 now is to put some money in a traditional IRA account by April 15. You can deduct up to $5,000 of traditional IRA contributions, depending on your income level and whether you or your spouse is covered by a retirement plan at your day job. Roth IRAs aren’t deductible. They are made with post-tax dollars, so they’re completely tax free when you take the money out in retirement.
Get more useful tax prep and planning advice in my book Tax Tips for Authors. It will help you get your deductions for 2012 and get organized in advance for 2013 tax filing, with bookkeeping advice.