Today is April 15.  For those of you from non-US countries, that probably doesn’t mean much.  To us Americans, today is Tax Day, the deadline to file my tax returns.

If you’re working at the last minute then you might be looking for last minute tax tips.  Of course, what many people really want to know is what happens if you don’t file your taxes by the deadline and is there anything I can do if I can’t get my taxes done?

The answer, actually, is surprisingly benign.  Filing late is a no-no and can result in all kinds of problems, not the least of which are penalties.  But, there is a ray of hope.  Instead of filing your tax return, file for an extension.  One extension is granted automatcially, so all you have to do is send in the form.  If you can’t get your taxes done by April 15, then make sure you file your request for extension in its place to avoid penalties, fees, and interest.

If you file for an extension when are your taxes due?  October 15th, a full six months later.  Whew, big relief eh?  You’ll need IRS Form 4688 Filing for an Extension.  It has instructions for using the paper form, or other electronic methods.

But, there is a catch.  Your TAX RETURNS are given an extension to September, your TAX PAYMENT is not.  In other words, if you end up owing money, you still have to pay it by April 15th even if you get an extension.  How are you supposed to know how much to pay if you haven’t done the tax return yet?  Guess.

Actually, estimate, is the correct answer, and make sure you are on the “over” side, not the “under” side.

For example, if you’ve partially completed your taxes and it looks like you would owe about $2,000 but you haven’t gotten all of your income entered in yet, then send Uncle Sam a check for $3,000, or whatever you are pretty sure will end up being too much.  You’ll get the extra back as a refund when you do finally file your income taxes which is an incentive to do them before September.

On the other hand, if it looks like maybe you’ll owe $2,000 and you are positive all of your income is accounted for, it’s just that you aren’t sure about some deductions, then send the IRS the two-grand and see if those deductions work out.  If not, no harm, no foul.  If so, you’ll get a rebate too.

If you still plan to beat the midnight deadline, make sure you know which, if any, post office in your area will be staying open late to collect tax returns.  With budget cutbacks, you can expect the post office to be a little less grand in how many collection locations it leaves open late.

Ok, first of all, I’m only posting this today because the media is starting to do their “last minute” tax filers stories and I want the readers here to be able to come get the real, actually useable, last-second tax filing tricks.  But, let me just say, that if you consider April 3rd to be doing your taxes at the last minute, then, you, sir, are a wimp.  (I file electronically on the 14th.  Hey, you never know when you might think of something that could save you another $500!)

How To File Taxes Quickest

Mail them, e-File, whatever.  Filing is not the part you have to worry about.  Getting the forms completed right is what takes time.  So, forget all about filing, focus on the Forms.

1. Get The Electronic Forms – If you aren’t using software, then get the fill-in PDF files from the IRS.  You can type your answers right into the Form 1040 fields and save on typing, hand-writing, scanning, and printing.  Best of all, when you are done, just save the file to your hard drive.  (Make a backup CD and store it with your hard-copies of 2008 tax documents.) 
2. Big Income First – The 1040 starts with Income, so jump in.  Start by just sticking in the big things, salaries (W2 Forms), business payments (1099 Forms), and so on.  Interest, dividends, and the like take a long time and can throw off your momentum so feel free to set them aside and move on instead of bogging down on entering all 18 of your 1099-INTs.  Just make sure to keep the items not input in a separate folder.  Sorting through what you have and have not already done is the slowest of all.
3. Big Deductions – Sure you want to deduct that $5 you gave the kid up the street for his school fundraiser, but if you are in a hurry throw it in the pile with all your 1099-INTs.  Input your mortgage interest, student loan interest, child tax credits, property taxes, and so on.
4. Use Tax Software – Buy it, or don’t.  Use the “free” online versions to jam your numbers in.  You only have to pay when you file or print.  Don’t file or print.  Get the math done for you and then fill in your PDF fillable forms.   By the way, if you do want to print, Press ALT+Print Screen.  That takes a screenshot or capture of the active Window (if you get the wrong window, just click on the title bar of the one you want and click ALT+Print Screen again.)  Paste that picture of the screen into Word or your favorite graphics program and voila, print out.  (You cannot file screenshots.)

The point is to get an idea of how bad it’s going to be.  If this first pass with just the big stuff shows you getting a huge refund then you can worry a little bit less about having to read through every possible tip and trick you can find to try and save yourself from a huge tax bill.  If, on the other hand, you are coming up with a monster tax payment you have to make, then you know that you have to focus and start looking for every piece of paper you can find.  When you time = real dollars, you’ll find the time – trust me.

Filing taxes as a small business or as self-employed?  If you aren’t using a sole-proprietorship business structure, chances are you are filing as an Limited Liability Company, or LLC.

If so, the IRS has a guide for filing as an LLC.  Basically, for purposes of Federal Income taxes, there is no such thing as an LLC.  Either you are a sole-proprietorship or you are a partnership or corporation for tax purposes.  However, this status does not affect your legal status as a LLC for purposes of liability and other state related laws.

If you are self-employed or employed in a small business with your spouse, go for the sole-proprietor method since it is much easier.  This way, you just file your Schedule C on your Form 1040 and you are off.

If you have employees or are in a partnership with a non-spouse, then you’ll probably need to go the partnership or corporation route.  Of course, then the Schedule C isn’t good enough, you’ll need a Schedule K or other form to report your share of the profits and expenses.

Keep it simple if you can and file your LLC as a Schedule C.

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So, you’re doing your taxes and everything is just fine.  You are approaching the end of your Form 1040, when you get blindsided by a question you’ve never seen before.

Line 70 of the 1040 says “Recovery rebate credit (see worksheet on pages 62 and 63)”

Yikes!  What is that about?

Look around and chances are you’ll get almost exactly the information you need, but with all of the if, ands, or buts that are crowding around the explaination, it can be tough to know if you are getting it right.

So, here is the quick and easy version.

Enter 0 or leave it blank.

That’s it.  Nice and easy.

Wait, too easy?  You are probably right.

For almost everyone, this line should be blank.  The only exception is if you DID NOT get your stimulus payment last year for some reason, OR if you got a reduced stimulus payment.  If you don’t remember complaining about getting a reduced stimulus payment, then you almost certainly did not get a reduced payment.  You would remember, trust me.

If you want to double check, go back and check your bank statements.  The payment was $300 for single filers, $600 for joint filers, and $300 per child.  If you have 2 kids and see a deposit in May for $1200, then you got your full payment and line 70 should be blank.

The stimulus payment was not a credit or advance on your 2008 taxes, so you are not paying it back with this line.  In fact, this line is a subtracting line which means that entering somethign here increases your refund.  So by entering a number here you are not paying back a stimulus advance, you are claiming another one!

Short version.  Line 70? Leave it blank.

Ok, everyone and their dog tells people to make their 2008 IRA contribution now in order to reduce their 2008 income taxes.  But, there is good reason for that.

If you qualify for a deductible contribution to a traditional IRA either by meeting the income limits, or because you don’t have a retirement plan provided for you at work, then it can give you a much lower tax bill and you get to keep all of the money.  How many other deductions can claim that?

If you contribute $5,000 to your 2008 IRA, you would get a $5,000 tax deduction on your 2008 taxes.  Now, that is a deduction, not a credit, but in the 30% tax bracket, that works out to a $1,500 savings on your taxes.  For many tax payers, that is the difference between oweing money and getting a refund. You get an even bigger savings if you are a high income earner because your deductions are more valuable due to your high tax bracket.

It gets even better.  If you are married filing joint, and you can make a similar deductible contribution for your spouse, that’s $10 grand that you can sock away, and now you will save $3,000 on your taxes!

If you have an emergency fund, or some cash sitting in a brokerage account after selling some investments or real estate this year thanks to the stock market downturn, this is a huge opportunity to both earn some money on your cash ($3,000 savings on your taxes is like earning $3,000 on your $10,000 investment) and to get future growth and earnings tax defered.

You have until April 15 to mail your contribution to your broker, so there isn’t necessarily any rush, but you don’t want to be caught up opening a new IRA account if you don’t already have one.  So, open an IRA account NOW, and then worry about getting the $5,000 or $10,000 into it later.

File online for free with the IRS free e-file system.

The IRS offers taxpayers a way to file their taxes online for free without having to buy any tax software like TurboTax or TaxCut.  Just go to the IRS website (www.irs.gov) and click on e-file to get started.

The free government e-file system allows taxpayers with incomes up to $54,000 to file tax returns for free online.  If you make more than $54,000, you are out of luck and will have to go another route to file your taxes.

When you are done, you can pay electronically online too.

Pay Your Taxes With Credit Card

Thinking about paying your taxes online electronically with a credit card to earn a free rewards trip?

That might not be the best move.  Sure you can earn points or miles on your credit card rewards programs, but it won’t be cheap.

The two major online payment processors, Official Payments (which is not official in anyway, it’s just their sneaky brand name), and 1040.com charge electronic filers 2.49% to make federal income tax payments via credit card.  That means a $500 payment could cost you an extra $12.45 just to use your credit card.  That’s worse than the highest ATM fees you’ll find in a bar.

That credit card fee also means that the value of any points or miles you might be getting are wiped out too, since most credit card reward programs earn points that are redeemed at about 1%.  Most cash back cards pay 1% as well, so paying a 2.49% fee to earn 1% doesn’t make much sense.

The exception to this rule is if you are in some sort of special intro period with your credit card rewards program or cash back program.

For example, if you have a new cash back credit card that pays 3% cash back on everything for the first 90 days, then you can actually come out ahead 0.51%.  Not big savings, but you do get the convenience of paying electronically for free.  However, if your cash back program has an annual limit and you expect to be hitting it, don’t waste your cash back eligibility on just getting a measly 1/2 percent.

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