Monday, March 3, 2008

Finalizing Your Return

Finalizing Your Tax Return


What if You Owe. It is very important to file your tax return by April 15th, or get an automatic extension of time to file. Why? The penalty for failing to file a tax return is 5% per month – per month, not per year! – for every month that you have not filed your taxes. The maximum penalty is 25% of the taxes you owe.

By contrast, the penalty for failing to pay is half of one percent (0.5%) per month of the amount of taxes you owe. The IRS will also charge you interest on the amount of tax you owe.

Owing additional tax at the end of the year isn't fun. But here's how to get a handle on the situation.

File your taxes, or get an extension.

Pay as much as you can by April 15th.

Consider paying your taxes by credit card, or setting up a payment schedule where taxes are automatically withdrawn from your checking account.

If you will not be able to pay off your balance in a few months, ask the IRS for an installment agreement by calling their toll-free number at 800-829-1040. An installment agreement is a monthly payment plan.

To avoid having to owe the IRS next year, you should increase your income tax withholding. Fill out a new Form W-4. Use the worksheet on the Form W-4 to calculate a precise withholding amount.

Third Party Designee. If you want someone else to be able to discuss your tax return with the IRS, fill out the Third Party Designee section of your tax return.

This is helpful if you want your tax preparer to be able to talk to the IRS about any questions or concerns the IRS might have about your tax return. You can also use this area to designate a family member, caregiver, or other trusted person to deal with the IRS on your behalf.

Your 3rd Party Designation will expire one year from the due date of your tax return.

Signing. You are required to sign your tax return. By signing the return, you are declaring under penalty of perjury that your tax return is accurate. You must not cross out, put a line through, or white out the perjury statement just above the signature line. If you do so, the IRS will consider your tax return "frivolous" and assess a $500 civil penalty.

You are required to date your tax return. The date must be the day you actually signed the tax return.

Giving the IRS your occupation and telephone number is optional, but highly suggested.

Paid Preparer's Use Only. If you have paid a tax professional to prepare your return, the preparer must fill out this section of the tax return. He or she must sign and date the return, must write down their Social Security Number or Preparer's Tax ID Number, and provide other information about the tax firm. Do not let your preparer leave this area blank.

If someone is helping you to prepare your tax return, such as a friend, relative, or volunteer, they do not need to fill in this information if they are not being paid to help you.

Assembling Your Return. Staple one copy of each of your W-2 statements to the front of your tax return. If you have other schedules and statements to file, sort them from lowest to highest using their Attachment Sequence Number in the upper right-hand corner of the form. Staple everything together.

Mailing Your ReturnMail your tax return to the right IRS Service Center.



How to Prepare Your Tax Return for Mailing



More Tax Filing Resources
File an Extension

IRS Payment Plan

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