Last Minute Tax-Tips
Protect yourself with an extension
deadline for filing your individual tax return is April
15. However, if you cannot file your return on time then
you should file a four month extension. If you are a U.S.
citizen or resident and live and work outside of the U.S.
then your filing date is June 17. Non-resident aliens also
automatically have until June 17, unless there is withholding
on income. For non-resident aliens if the withholding satisfies
the tax due then a tax return need not be filed. However,
there may be a possible refund that is given up.
Remember, in all cases tax is still due April 15 to avoid interest and late paying penalties and only avoids the late filing penalty. The late filing penalty is five percent per month of the tax not paid to a total of 25 percent. An extension gives until August 15 to file your return.
The first step is to estimate what you may owe. Then total your withholdings, quarterly estimated tax payments, any carryover from 2000, and tax credits. If you later find you overpaid when you file your return you will get a refund. However, if you estimate that you owe then it is wise to send that amount in. In any case always submit the extension, even if you cannot pay what you calculate you owe. You should send in what you can afford.
There are two ways to submit an extension. First by mailing the paper Form 4868, Application for Automatic Extension of Time to File, along with any payment. The mailing address depends on where you normally file and whether you are making a payment. Second way is by phone if you filed a return last year. Filing by telephone is advantageous because you get a confirmation number. You can also make a payment by electronic funds withdrawal. To do so, you will be asked for last years adjusted gross income. The extension E-file phone number is toll free 888/796-1074. Payment by certain credit cards is also possible, but be aware that it is expensive.
There are a number of other tax planning reasons for filing an extension besides that of not having your paperwork together by April 15. It can give you time to make important decisions concerning retirement plan contributions and making the new deemed sale election. You should contact a competent tax advisor concerning these matters..
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I have to file?
By Rick Steele CPA
Generally, you must file a 2001 federal income tax return only if your gross income exceeds these levels:
Married filing jointly $13,400
Single $ 7,450
Head of Household $ 9,550
However, different limitations apply for children, seniors over 65, and in other special situations. It may be beneficial for you to file a return even if you are not required to do so. For example, you must file a return to receive a refund of income taxes withheld or to claim certain tax credits.
Check your childrens need to file a return. The filing requirements for children vary depending on whether their income is from investing, working, or both. Your child needs to file a 2001 tax return if he or she had earned income only (wages) of more than $4,550; or unearned income only (i.e., interest and dividends) of more than $750 (in some cases, parents may elect to report a childs unearned income on their own tax return.); both earned and unearned income totaling more than the larger of $750 or earnings up to $4,300 plus $250; net self-employment income of $400 or more.
If you are the caretaker for elderly parents, dont overlook their filing requirements. Even though they may not have filed a return for years, review events that may require them to file a return for 2001. Dont forget about state income taxes. Even if you moved from a different state last year or split your time living between states, you might be required to file a state return.