It pays to explore twists in tax code
A crazy, ever-changing tax code means that tax filers cannot find one-sizefits-all answers to their tax returns.
So it pays to research new twists — or even unexpected forms that show up at your door.
Look into a new potential one-time break this tax season.
The Internal Revenue Service announced March 20 that it would not charge a late-payment penalty for taxpayers who file for an extension for their 1040 tax return and their tax return includes any of 31 tax forms that faced delays during the slow-starting tax season. You’d still pay interest on what’s owed, if you owe money.
Delays hit those filing returns that included education credits. Some taxpayers filing for the energy-efficient home credit and the qualified plug-in electric drive motor vehicle credit weren’t even able to e-file their returns until March.
To get the penaltyfree break, an estimated amount of taxes owed must be paid by the original date of the return. A good-faith effort must be made to properly estimate the tax liability on the extension application.
Typically, a late-payment penalty is 0.5 percent per month and would be charged on tax payments made after the regular filing deadline. But remember the new break only applies to any forms delayed because of the January enactment of the American Taxpayer Relief Act. Check out IRS.gov.
Much confusion hit earlier this season on education credits, with taxpayers complaining loudly about problems and delays involving tax returns filed during a specific time in February.
In recent weeks, the IRS said it has worked diligently to process tax returns affected by a problem with a limited number of software company products involving some taxpayers filing Form 8863, Education Credits. The IRS previously estimated that it could take four weeks to six weeks from March 12 to issue refunds to taxpayers hit by the problem.
But the IRS said in March that the work is being completed more quickly than anticipated, more often in two weeks to four weeks. Many taxpayers in this group have received their refunds, and more are on their way. The IRS said it expects to issue nearly all of these refunds for those taxpayers caught in the problem in early to mid-April.
If you’re filing now, make sure to carefully review Form 8863 for the American Opportunity and Lifetime Learning credits. Even though the software troubles appear over, tax preparers say people can still make mistakes with Form 8863.
One new part of the form is Part III — where you’re required to supply some specific personal information. Do not skip that section.
Here are four tips that could save you money:
If using snail mail and not e-filing, do not just automatically mail a return to the same address you used last year. The Internal Revenue Service has changed the filing location for several areas. See IRS.gov.
Did you file a tax return for 2009? The IRS notes that more than $917 million in refund money awaits about 984,400 taxpayers who did not file a federal income tax return for 2009. But the 2009 return must be filed no later than April 15 in order to collect that refund money. About half of the potential refunds for 2009 are expected to be worth more than $500.
Save hundreds of dollars on a tax preparation bill by going through your own checkbook, credit card statements and receipts. If you organize your own documents, instead of handing over a shoe box to a tax preparer, you can save big money on hourly billing.
Think about any new deductions in your life. Did you have a baby last year? Did you take out a mortgage to buy a home? Did you make a larger-thanusual contribution to a special fundraising effort?