Last Minute Tax Tips
If you've been procrastinating on filing your taxes, listen up; Stephanie AuWerter, Contributing Editor for SmartMoney.com, has some tips to get the ball rolling.
If you're behind on your income tax paperwork, there is hope. Consider filing an extension. "You need to fill out just a very short form - it's IRS from #4868 - and approval is automatic. Now the bad news... It's not an extension on your tab," says AuWerter. So while you'll have an extra six months to file your paperwork with the IRS, any money you owe will still be due on April 15.
It's also important to know when it's okay to do your taxes on your own and when you need to seek help from a professional. "The tax code has become increasingly complicated," says AuWerter. If you have fairly simple returns, it's okay to use tax software or file online by yourself. However, if your returns are more involved, you'll need to find a professional to help. Be careful who you choose, however, because not everyone who says they're a tax pro is reputable. "Look for somebody who's either a CPA or an enrolled agent," says AuWerter.
In these tough times, some Americans are worried about being able to pay their tax bill this year. Before losing hope, it's important to consider your payment options. You can pay by credit card, but you'll be charged an extra 2.5% "convenience charge" on top of the money you already owe. "As an alternative, you can borrow from Uncle Sam," says AuWerter. "Here, the drawback is that there is a $52.00 set-up fee, assuming that you agree to make your payments electronically, and then you'll be charged 8% interest on top of that." Instead, consider a loan from a friend or a wealthy relative - all that interest can add up very quickly.
If you're looking to cut down on your tax bill, consider investing in a tax-deductible IRA. "Most folks can contribute $5,000 as their 2008 contribution, "says AuWerter. If you're eligible, doing so will decrease your tax bill and bolster your retirement savings at the same time.
Finally, for those lucky few who get a tax refund, examine it carefully. If you're getting back a large sum, you may want to look at your W2 form and increase the number of exemptions you're claiming. In reality, you've given the government an interest-free loan for the past year. "Getting a refund is great, but ideally, you want to shoot for getting a small one rather than a really big one," says AuWerter.
For more last minute tax tips, as well as additional personal financial advice, click here to visit www.SmartMoney.com.