Tax Day for U.S. taxpayers typically means April 15. However, taxpayers can file an automatic extension to file their tax return by April 15 allowing them to delay their filing responsibility until October 15. Each year millions of taxpayers file extensions and 2013 was no exception. In fact, 2013 extensions were higher than ever compared with prior years. This year more than 10 million taxpayers filed an extension and if you are one of them and have yet to file, then the deadline is coming soon. Here are some helpful hints and useful information to help you finish your tax return without any last minute panic and maximize your refund or reduce that balance finally owed.
First, and most importantly, organize your documents and records now in case you need time to find any missing information. While the IRS will let you know if you missed any income, no one will tell you if you missed a deduction or credit so if you leave them off they stay off. Keep it simple. Personally I like the following broad categories and I generally create a folder or envelope or staple the documents together in the following buckets:
• Income items--W2, K-1s, 1099s, Gaming winnings, and other items of income
• Deductions--Schedule A items, mortgage interest, donations, taxes paid
• Capital Items--Documents related to stock sales and the like - 1099s, broker statements
• Credits & Other--Education credits, adoption credit, Energy credit and related support
• Prior-Year Tax returns--Prior 3 years of tax returns makes for a great place to start
Secondly, review your prior-year tax returns and review any life changes you had during the year. As noted above, your prior-year tax return is a good place to start when determining what your sources of income and expenses were in the previous year. This can help jog your memory about your income and expenses for this year. Life changes, such as getting married or divorced, having a child, sending a child to college, becoming a caretaker for an older family member, or even retiring can have a profound effect on your tax return. Many changes have additional expenses, or even credits, to help reduce your taxes and increase any potential refund.
A word of caution for those who owe taxes, or think you owe taxes -- your extension delayed the filing of your tax forms and suspended any late filing penalty, however, taxes were still due on April 15. If you did not send in a payment to cover at least 90 percent of your taxes with your extension, you may be penalized each month past April 15 that you didn't pay your taxes. This penalty on an unpaid balance due makes it critical for you to claim all deductions and credits that may be available to you so you don't owe the IRS any extra money.
If you are unsure of your credits and deductions, have questions, or just want to remove some of the additional stress in your life, see a tax professional. Taxes are complex and if you don't know what you are missing, you can cost yourself in additional taxes and headaches -- especially in these final weeks before the dead line. This may sound like a plug for paid tax preparation, but it really is simply a best practice as time runs short and you are pressed for more critical day to day life activity. Be sure to have your records in order to maximize your tax benefits and minimize your time and cost. In any event be sure to start now and not wait to the very last minute as that can lead to a hurried rush and lend to overlooked tax benefits, forgotten deductions, omitted pro-taxpayer life events and other mistakes that can cost you tax benefits and lost money.