Apr 07 2011

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Great tax tips

Taxpayers have an extra weekend to file their federal income tax returns this year because of a District of Columbia holiday.
The deadline for 2011 is Monday April 18, instead of April 15.
“Usually, 20 to 25 percent of all taxpayers file in the final two weeks of the tax season, and about 7 percent of taxpayers generally seek a six-month extension to file,” said Clay Sanford, an IRS spokesman.
If you cannot meet the April 18 deadline, file an extension, Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. All taxpayers can use IRS Free File at IRS.gov to submit a Form 4868 for an automatic six-month extension. And, Free File will be available through the October 17 extension deadline for late filers.
“More than 230,000 Texans have used Free File so far this year–it’s a great online resource,” Sanford added.
Sanford said that if you just haven’t yet filed your return, doing some research at IRS.gov can pay off for some folks.  For instance, if your income decreased because of a layoff or a cut in wages, you may be eligible for certain tax credits, such as the Earned Income Tax Credit.  Numerous economic recovery tax credits are also still available. For some credits, such as the Making Work Pay Credit, individuals must claim the $400 ($800 for married couples) in order to receive it. (Use Schedule M to calculate your Making Work Pay credit.)
Most importantly, if you believe you may have trouble paying your taxes, contact the IRS immediately. There are steps that can be taken to help ease the burden.
“The IRS recognizes that some taxpayers may be going through tough financial times,” Sanford said. “Unfortunate events such as job loss or tapping a retirement fund can obviously have an impact on taxes.”
If you are unable to pay the total balance due, you should pay as much as possible and then contact the IRS about an installment plan. Even if you cannot pay the balance due, it is important to either file a return or request an extension to avoid the failure-to-file penalty.
Additionally, if you pay as much as you can by April 18, you can lessen the amount of interest owed.  The late payment penalty is usually one-half of one percent of any tax (other than estimated tax) not paid by the regular due date.  It is charged for each month or part of a month the tax is unpaid.  The maximum penalty is 25 percent.
In addition to Free File, the IRS offers other free tax help services through volunteers at 12,000 sites nationwide. The Volunteer Income Tax Assistance (VITA) sites serve taxpayers whose 2010 incomes were $49,000 or less. Tax Counseling for the Elderly sites serve taxpayers who are 60 and older. A list of sites is available on IRS.gov.

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