Apr 10, 2011 1
by Lema Abeng-Nsah
Recent statistics from America’s Internal Revenue Service (IRS) show that “as of March 25, the IRS has received more than 82 million individual income tax returns, which is 58 percent of the 141 million returns expected this year. The IRS has received about the same number of returns so far this year as it did at this time last year, while processing of returns is up 3 percent from the same time last year.“
It is important to keep up with tax matters as they affect working Americans and their families in many ways, directly or indirectly. As this year’s tax filing season for individuals counts down, here are a few things you need to know:
1) Credits available to you
Credits help reduce your tax liability if you meet qualifying criteria. When filing your income taxes, qualifying credits claimed on tax returns are usually of great help. Examples of these are Earned Income Tax Credit, Child Tax Credit, Additional Child Tax Credit for parents with qualifying children; Education credits such as the American Opportunity Credit (up to $2,500 for college students) and the Lifetime Learning Credit; Energy Credits for homeowners who made purchases that made their homes more energy efficient; First-time Home buyer Credits, for first time home buyers who according to the IRS “entered into a binding contract by April 30, 2010, and went to settlement by September 30, 2010”, and the new economic recovery tax credits such as the Making Work Pay Credit, which individuals must claim using Schedule M for an extra $400 for individuals and $800 for married couples.
2) File an extension
It has been reported that 20 – 25% of all taxpayers file in the final two weeks of the tax season and about 7 percent of taxpayers seek a six-month extension to file. This year, tax day has been moved from April 15th to April 18th 2011 because the 15th happens to be a District of Columbia holiday. If you can’t make the April 18th tax filing deadline, file an extension using Form 4868, for an automatic 6 months filing extension which gives you until October 17th 2011 to file your taxes. This form must be sent to the IRS by midnight of April 18th. Note that an extension only gives you more time to send in your paperwork, not to pay your federal amount due if you have one. If you owe the IRS, interest usually starts to accrue as of April 18th and penalties might also be added. Make sure to contact the IRS for relevant payment arrangements to minimize these.
3) Choose E-file
Last year alone, nearly 100 taxpayers went for IRS e-file or electronic filing, whereby tax returns are securely transmitted electronically. E-file is fast, easy, secure … and oh, so convenient as you don’t have to manually add and subtract numbers – the software does most of the work. While you may qualify for free e-file if you make $58,000 or less, it is highly recommended that you use the services of tax professionals in preparing and transmitting your taxes. These individuals ensure that you get all relevant and qualifying credits and deductions available to you.
4) Don’t fail to file
There’s a popular saying which goes taxes and death are the 2 un-avoidables in life! It’s almost impossible to hide from the IRS; as a working American, fulfilling your tax obligations can’t be avoided. You are required to file your taxes every year … and it is wise to comply. We have all read or heard about celebrities being slapped with million dollar tax liens like Lil Wayne recently and jail times at worse as was the case with actor Wesley Snipes who is spending 3 years in jail for tax evasion; most importantly, tens of thousands of everyday Americans face similar consequences, most commonly garnishment of wages for non-payment of taxes. Instead of procrastinating, take the bull by the horns this year and schedule an appointment with a tax professional. Guess what? Your situation might not be as bad as you think.
Encourage someone you know to do the right thing and avoid painful consequences. Uncle Sam is quite unforgiving on tax matters, but somewhat flexible in other things. Do you agree? Leave a comment.
Lema is a blogger on Face2Face with Success
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