Home

SACRAMENTO, April 8 /PRNewswire/ -- Yikes! There are only a few days to go, and by now you've probably given up trying to do your own taxes. You've pulled all the hair out of your head, tossed the computer out of the window, and gathered up all your paperwork into a shoebox and headed out into the cold, unfeeling world to find a tax professional.

First of all, don't feel too badly; the IRS estimates that approximately 40% of U.S. taxpayers, or about 52 million Americans, will wait until April 15 to file their taxes. The Internal Revenue Code and IRS Regulations number more than 22,000 pages. For all but the simplest returns, it can take an Enrolled Agent or other tax professional to ensure that you are receiving all the deductions and credits to which you're entitled.

When you go shopping for a last-minute tax pro, make sure your shoebox contains W-2 statements -- reflecting wages earned through the year for all jobs you worked -- and 1099 forms for all of your investments and other income sources, including savings accounts. You'll also need receipts for charitable contributions, a logbook with receipts for business-related mileage and expenses, and other key documents. An Enrolled Agent can tell you more.

What was new in 2003?

Tax rates were lowered on some capital gains and dividends, while certain tax credits were increased, including Child Care, Child Tax, and Lifetime Learning Credits. Believe it or not, it's not too late to take advantage of some tax breaks. For example, you can make a contribution to your IRA or Roth IRA for last year until April 15, so long as you tell your financial institution to make sure to credit your contribution for 2003.

Remember that "free money" you got last year?

The most widespread mistake on 2003 tax returns is improperly calculation of the Advance Child Tax Credit. The Credit was raised from $600 to $1000 for 2004, but most eligible taxpayers received up to $400 (or $800 for two or more children) in advance, via a check from Uncle Sam. So now you've got to deduct the portion of the credit that you've already received. There's a separate line for that (line 2 of the Child Tax Credit Worksheet, which you'll need to calculate what you're going to put on line 49 of Form 1040, which determines line 53, which you'll subtract from line 43, which determines line 54, and now you see why we suggested you visit an Enrolled Agent). Enrolled Agents, just in case you don't know, are tax professionals licensed by the federal government to represent taxpayers and assist them with tax planning and tax return preparation.

And if you can't file your tax return on time?

File an extension. A request for a four-month extension of time to file a tax return will automatically be granted by the IRS (use Form 4868). Note that this is an extension to file, NOT an extension to pay. Payment toward any tax due is not required for approval of an extension, but the tax liability must be properly estimated on the form. If you can't pay all the tax you owe, the IRS will usually approve an installment agreement (Form 9465) if you owe less than $25,000 and you're current with all your other taxes.

Whether or not you file an extension, if you owe tax you will also owe penalties and interest on the balance due, which start to accumulate on April 15. Without an extension, the penalty for late filing is a hefty five percent per month of the balance due (up to a maximum of 25%), on top of the interest. With an extension, the penalty for late payment is much lower, only one-half of one percent per month, which you can have reduced to one-quarter of one percent per month with an official IRS installment agreement. The interest rate to the IRS is adjusted quarterly, but is currently at 5% annual rate.

California residents are automatically granted an extension until October 15 to file their California returns; no extension form is required. If you owe additional tax due on April 15, you should pay it with a coupon, Form 3519. If you don't pay the tax by that date, you'll be liable for a flat late payment penalty of 5% of the tax due, plus accrued monthly penalties and interest.

The best way to avoid last-minute income tax worries is with proper year- round tax planning. In California, you can locate an Enrolled Agent in your area by calling toll-free 1-800-TAXPRO-5 or online at www.csea.org. Outside California, the Enrolled Agent referral number is 1-800-424-4339.

More News:

4-08-04 Jobless Claims Plunge Last Week

4-08-04 April 15 Is Not the End of Tax Concerns

4-08-04 Beware of shady credit-fix schemes

4-08-04 Investors' concern shifts to Iraq war

4-08-04 L.A. couple sues IRS to win tax deduction

4-08-04 Manufacturer tax cut snagged on partisan debate

4-08-04 Paying Taxes By Credit Card Off To A Slow Start

4-08-04 Solid Sales Lift U.S. Retailers in March

4-08-04 Treasuries Wilt at Signs of Job Strength

4-08-04 US manufacturing outlook rises to record high

4-08-04 U.S. mortgage rates unchanged on Thursday

Financial News