Countdown to Tax Day- 6 days left until the tax filing deadline
Inaccuracies May Cost 1 in 5 DIYers More Than $400 on Average – Totaling $1 Billion
A recent H&R Block Second Look® review study revealed that when taxpayers prepared their own tax returns, about 1 in 5 of them left money on the table. Taxpayers are leaving money on the table due to the following, among other things:
- Not itemizing when they should or not itemizing all they could
- Not claiming higher education credits when they are appropriate or claiming the wrong tax break
- Not claiming all appropriate expenses to offset income on Schedule C or failing to claim income properly on Schedule C.
People are leaving money on the table likely because they don’t know what tax credits and deductions they qualify to claim. The good news is that with some professional guidance, they can get their money back.
7 days: When Mistakes and Taxes Collide, ‘Mistaxes’ Result
“Fat-finger” entries and misunderstanding what is being requested are “mistaxes”– the mistakes on tax returns that result in overpaying or underpaying taxes – and even delaying tax refunds. Save time and money by avoiding these common mistaxes:
– Selecting the wrong filing status (single, married, head of household, etc.)
– Claiming ineligible dependents
– Forgetting to include required information on W-2s and 1099 reporting forms
– Failing to claim or miscalculating important tax breaks, such as education credits.
One in 4 taxpayers waits until the last two weeks of the season to file their taxes and in the hurry to make the deadline, mistaxes could result. Filing an accurate return is the only way to make sure taxpayers pay only what they owe. To help taxpayers who can’t file an accurate return by the April 15 deadline, H&R Block offers help filing extensions at an office and online.
8 days: Submit an extension to file if one week isn’t enough time to file an accurate tax return
This year, an estimated 10 million taxpayers will apply for an extension to file, making their filing deadline Oct. 15, but any taxes owed are still due April 15. The monthly, failure-to-file penalty is 5 percent and the failure-to-pay penalty is 0.5 percent. For example, if someone owes the average balance due of $4,500, the failure-to-file penalty is $225/month. But, the failure-to-pay penalty (for not paying the full balance on time) is only $22.50/month.
“If in doubt, don’t throw it out.” Taxpayers should remember these words when they wonder if they will need a document to fill out their tax return. Whether taxpayers get help from a tax professional or go the DIY route, having the right documents is critical. Without these documents that substantiate what happened over the year, they could end up overpaying or underpaying what they actually owe in taxes.
In addition to having all W-2 and 1099 reporting forms – including those from banks, brokers and bosses – tuition receipts for higher education, receipts to back up any tax breaks claimed (e.g., for charitable donations) and personal property tax receipts are good to have on hand. All this information will help taxpayers file accurate tax returns.
12 days: Tax deadline is approaching, but it’s always audit season
The profile of a potential IRS audit candidate has shifted from the rich to include people who make far more modest incomes. Of the nearly 1.5 million audits conducted in 2012, 2 in 3 were of people who made $50,000 or less.
Document-matching programs make it easy for the IRS to check income reported by taxpayers’ bosses, banks and brokers. When being audited, being able to substantiate what is on the tax return is very important, making organized financial records a must-have.
Tax season is wrapping up, but audits are conducted year-round. The IRS may contact a taxpayer as late as three years from the filing date. However, contact may be made very soon after the return is filed if an item is flagged for some reason.
13 days: Taxpayers risk losing money when deciding not to file returns
Filing status, income and age help determine if a worker must file a tax return. Whether a taxpayer is claimed as a dependent also is a factor. For example, a dependent earning more than $6,100 in wages must file a tax return while a single worker not claimed as a dependent may earn up to $10,000 and not be required to file.
Even those not required to file a tax return should file a return to get back taxes withheld and/or to claim frequently overlooked tax credits such as the Earned Income Tax Credit, Additional Child Tax Credit or American Opportunity Tax Credit for higher education if eligible.
14 days: Taxpayers could lose twice with property loss
Losses resulting from natural disasters in the United States in 2013 totaled $32 billion. And, every year losses from household burglaries reach nearly $5 billion. Both types of losses can impact individual tax returns.
House fires, storm damage, thefts and vandalism all result in losses that may qualify for a tax deduction. Generally, property losses not covered by insurance are tax-deductible as an itemized deduction on Schedule A.
Taxpayers in federal disaster areas may claim disaster-related losses on the current year’s tax return or on an original or amended tax return for the previous year. A tax professional can help taxpayers understand what works best for their individual situations. These taxpayers also may be eligible for extended tax deadlines and other tax relief.
15 days: Can’t pay taxes? File something by deadline anyway
While nearly 80 percent of taxpayers received tax refunds averaging close to $3,000 last year, others owed taxes. What should taxpayers who can’t pay by the April 15 filing deadline do?
First and foremost, taxpayers should file a return or an extension to file even if they can’t pay. The penalty for not paying any taxes owed in full is 0.5 percent of the unpaid balance per month, but the monthly penalty for not filing a tax return is 10 times that amount (5 percent per month). Both of these penalties have a maximum of 25 percent of the balance due.
If both penalties apply, the 5 percent failure to file penalty is reduced by the 0.5 percent failure to pay penalty so the maximum penalty that will be assessed is 5 percent of the balance due per month. When the failure-to-file penalty maxes out at 25 percent, the failure-to-pay penalty continues to run until it also reaches 25 percent.