Tax Tips for Procrastinators

About a fourth of taxpayers wait until two weeks before the deadline to file their tax returns. These last-minute filers typically fall into two categories: Either they owe the IRS money, which removes any incentive to file early, or they’re procrastinators who would rather wash a muddy dog than prepare their tax returns.

This year, the calendar was the procrastinator’s friend. April 15 fell on a Saturday, and because April 17 is a holiday in Washington, D.C., you had until Tuesday, April 18, to file your federal tax return. Now, returns on extension are coming due!

If You Don’t Owe...

If you’re due a refund, though, there’s no reason to sweat this deadline. The IRS will gladly hold on to your money until you get around to filing your return. 

There are instances in which you should file on time or file an extension even if you don’t owe the government money. If you converted a traditional individual retirement account to a Roth IRA in 2016, you have until October 16, 2017, to undo the transaction and avoid paying taxes on it. But to qualify, you must have filed your tax return or requested an extension by April 18.

If You Can't Pay...

Filing for an extension gives you more time to file your return, but it doesn’t give you more time to pay taxes you owe.

If you can’t come up with the money, you should still file a tax return. Otherwise, your bill will be inflated by failure-to-file penalties, along with underpayment fines and interest on the balance.

If you need just a little more time to come up with the money, you can ask the IRS for an additional 120 days to make your payment. There’s no fee to set up this agreement, although you’ll owe interest and other fees on the balance until it’s paid off.

If the amount you owe is large, consider requesting an installment plan with the IRS. With an installment plan, you can make monthly payments until the balance is paid off. Taxpayers who owe $50,000 or less can apply online. You’ll have to pay a set-up fee of $225 (or $107 if you arrange for direct debit from your bank account).

Another option is to pay taxes with your credit card. This may appeal to taxpayers who would rather owe money to Visa or American Express than the IRS, especially if they have rewards cards. But while the IRS will accept payments via credit card, it won’t pay the “convenience fees” credit card companies charge retailers. In 2017, the fees range from 1.87% to 2% of the balance. If you use tax software to e-file, the fees are even higher: TurboTax charges a 2.49% convenience fee. If you don’t pay off the balance by the credit card due date, you’ll also owe interest.

Avoid Last-Minute Errors

As you scramble to meet the deadline, make sure you don’t make these common mistakes:

  • Wrong Social Security numbers. Make sure the SSNs entered for everyone on your return match the names that appear on their Social Security cards. Don’t forget to include SSNs for all of your dependents; otherwise, you may not be able to claim them.
  • Bad account numbers. If you arrange for direct deposit of your refund, triple-check account numbers. Otherwise, your refund could end up in someone else’s account.
  • No signature. Sign and date your return. If you’re filing jointly, your spouse must sign, too.
  • E-filing PIN errors. When you e-file your tax return, you’re required to sign and validate the return electronically. In an effort to reduce tax-refund fraud, the IRS will no longer allow you to request an electronic personal identification number to confirm your identity. You’ll need to provide your 2015 adjusted gross income or the PIN you selected last year, plus your date of birth.

Don’t Overlook These Tax Breaks

As you rush to meet the filing deadline, don’t overlook money-saving tax breaks. For example, if you itemize, make sure you’re taking full advantage of the deduction for charitable gifts. In addition to deductions of cash contributions, you can also deduct out-of-pocket costs for charitable activities, such as the cost of mileage, parking and tolls in connection with volunteer work. If you donated used clothing or other household items during the year, you can deduct the fair market value of those items, too.

By Sandra Block for Kiplinger

Published: 08/29/2017