Last Minute Tax Day Tips Revealed
The dreaded tax day is less than 24 hours away, and many people have found themselves owing the government money this year... money they may not have.
But Amy McAnarney, executive director of The Tax Institute, the research arm of H&R Block, stopped by The Early Show to quiz us on what you "need to know, if you owe."
Early Show anchor Russ Mitchell asked five important tax questions:
Question: I lost my job last year, but I know I owe taxes. I will file an extension, which gives me until October 15 to pay my tax bill. Is this fact or fiction?
Answer: Fiction
"Just because you file an extension on your return doesn't mean it's extension to pay," McAnarney said. "You must bring your checkbook with you. You have to pay that bill. If you don't pay it you're going to be assessed interest just like credit cards.
"Also if you don't file the extension, the penalty could be greater. It could be up to 25 percent of your tax bill. So it's really important that you file the extension and you bring your checkbook."
Question: I'm struggling financially right now. So the IRS will work out a reasonable payment plan with me. Is this fact or fiction?
Answer: Fact
"In this tough economic time, the IRS is really working with taxpayers. Depending upon your need and the ability to pay, you could actually go on installment agreement to pay your tax bill," she said. "Or they have the special program called "Offer and Compromise," where you could actually have a reduced tax liability. So you need to work with your tax professional. Contact the IRS and they'll work with you."
Question: Yikes, it is April 14, I know I'm going to owe big and there is nothing I can do at this late date to lower my tax bill. Fact or fiction?
Answer: Fiction
According to McAnarney, there are three things that you still can do, but you have less than 48 hours.
"You can contribute to an IRA. That's an oldie but a goodie," she explained. "Another one, health savings accounts. Contribute - maximize your health savings account.
"Finally, new this year, if you buy a house within the next 48 hours, you can get a tax deduction on this year's tax credit on your return this year. But even if you buy the house up until Dec. 1, 2009, you still can get that credit on this year's tax return. So file an amendment."
Question: I don't have enough in my bank account to pay my taxes. I know my 401(k) plan includes a hardship provision, so I'm going to cash in part of it to pay the bill, and I won't have to pay the typical penalties that are involved in 401(k) plan. Fact or fiction?
Answer: Fiction
"You do have to pay the penalty. Hardship withdrawals are basically pulling money out of your 401(k), penalty is assessed," she said. "There is one exception though. If you've lost your job or terminated from your job and you're 55 years or older, that penalty probably can be waived."
Question: I paid my taxes, but I think I made a big mistake. Is it too late for me to recoup that money? Fact or fiction?
Answer: Fiction
"So you can go back and amend your return for the last three years," McAnarney said. "And sometimes this is a great way to say, 'maybe I missed some credits or deductions in previous years.' Get it double checked."