We are quickly approaching the 2013 Tax Season filing deadline, which actually lands on April 15th this year!
IMPORTANT REMINDER FOR THOSE FILING TAX EXTENSIONS
If you file a tax extension, remember that you are only extending the time to file your income tax return, not the time to pay any taxes due! You must project and/or estimate the tax due and pay the tax with your 2012 income tax extension. Failure to pay at least 90% of the tax due by April 15th will cause the assessment of Failure to Pay Penalties, even if you have a tax extension.
AVOID LATE FILING PENALTIES
If you cannot pay the taxes due, be CERTAIN to file your income tax return or tax extension TIMELY! This will avoid the assessment of the Failure to File Penalties by the IRS of 5% per month, up to a maximum of 25%.
Special Note for New Jersey Tax Filers: If you have not paid at least 90% of the tax liability due, your timely filed extension is NOT VALID.
Some things to consider as you prepare to file your income tax returns:
Directly deposit your refund into your checking or savings account so that you will receive a faster refund and avoid any worry about lost or stolen paper checks.
There is still time in 2013 to fund your 2012 SEP retirement plan by the return due date (including extensions). Your SEP contributions are tax deductible. You have until April 15th, 2013 to fund your 2012 Traditional or Roth IRA. If you are not covered by an employer retirement plan, your Traditional IRA contributions are fully deductible. You may also receive a tax deduction if you are covered by a retirement plan, such as a 401(k) plan, if your modified Adjusted Gross Income ("AGI") is under $58,000 (phasing out at $68,000) for single filers, or under $92,000 (phasing out at $112,000) for married filing joint ("MFJ"). If you are not covered, but your spouse is, you can receive a deduction if your modified AGI is under $173,000 (phasing out at $183,000) for MFJ filers.
Speak with your tax preparer to learn what your options are if you cannot pay what is due with your tax return(s). The IRS and the States have payment plan options that you may request in order to pay the taxes due over time (generally, with reduced penalty rates and interest accruing as you go). Under newly revised rules, the IRS is offering a "Fresh Start" to help individuals and businesses pay back taxes and often avoid tax liens when the criteria for their programs is met. Individuals can obtain a Streamlined Installment Agreement when their tax liability is $50,000 or under, with minimal financial disclosure required. Generally, you will have up to 72 months to pay the IRS. If you agree to a Direct Debit Installment Agreement, you will generally avoid a tax lien. There are also other options available in the event that you do not qualify for a Streamlined Installment Agreement, such as Offers in Compromise and Partial Pay Installment Agreements. Go to our site, http://www.lienbusters.com/links/ for more information. Please feel free to call Marty or me, if you have any questions or need assistance.
Overlooked tax credits and deductions. There are many tax credits available to individuals, such as the American Opportunity and Lifetime Learning Credit, Child and Dependent Care Credit, and the Retirement Savings Contribution Credit of 10% to 50% (up to $1,000 single and $2,000 MFJ) for income earners with AGI up to $28,750 (single) and $57,500 (MFJ). Some frequently forgotten deductions include those for worthless stock or securities, legal fees to collect taxable alimony or Social Security, personal property taxes on cars and boats (etc.), moving expenses, medical mileage, the cost of eye glasses and contact lenses, medical aids such as crutches, canes or orthopedic shoes, and so many more. Don't forget to consider business tax credits! There are many federal and state business tax credits. Did you hire an unemployed veteran in 2012, incur startup costs as a small employer for a pension plan, or incur costs as a qualified small business to comply with applicable requirements under the Americans with Disabilities Act of 1990? If so, you may qualify for a federal tax credit.
If you have income from the cancellation of debt, there are several available tax exceptions that may provide you with significant tax relief. Please call me or watch for my June Newsletter to learn more about this topic.
I hope that you are all having a fabulous Spring Season!