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Alan J. Lyons: Last-minute tax reminders

It's Your Money

Posted: April 1, 2009 6:44 p.m.
Updated: April 2, 2009 4:59 a.m.
April 15 is just around the corner and millions are frantically getting their tax returns completed and in the mail. Here are some last minute details to consider.

n Need more time to file? - If you cannot complete your tax return by April 15th, you can ask for an extension until October 15th by filing IRS form 4868. However, the tax must still be paid by April 15th. There is only an extension for filing the paperwork, not the tax. The California extension is automatic as long as the tax was paid by April 15th.

n Need more time to pay tax? - An installment agreement (IRS form 9465) allows you to pay off your tax bill in monthly payments. You tell the IRS how much you can pay with the tax return and the amount you want to pay monthly. A good rule of thumb is to make payments that will pay off the tax due in less then 36 months. The IRS does charge a fee for the agreement plus interest on the balance due, which works out to be around 8 percent. You also have to agree to pay future taxes timely by adjusting withholding or making estimated tax payments. The IRS also accepts payments by credit card.

n Avoid common mistakes - The most common mistake is math errors. Mistakes in adding up the number or transferring amounts from one schedule to the next will result in an immediate notice from the IRS. Using a tax preparer or software will help reduce math errors.
The next most common mistake is incorrect social security numbers. Be sure to double check the social security numbers for yourself, spouse and dependents. Even if you had someone else prepare the return, check the numbers. If the social security number is wrong, the IRS cannot process your tax return.

The tax return must be signed and dated. The IRS will send the tax return back if it is unsigned. If married, make sure both of you sign. Attach W-2s and 1099s that have any tax withholding. The IRS will send the return back if these necessary forms are not attached to the front of your tax return.

The IRS will confirm wages, interest, stock sales, retirement distributions and other income to the amounts reported on the tax return. Make sure that every item of income reported on a W-2 or 1099 is included in the return. Even a small amount of missing bank interest will result in a notice if the IRS knows about it.

Certify mail the returns with return receipt. This will prove they were filed on time and prove the government received it.

Don't forget the kids - Children who have income may have to file income tax returns. If your child had wage income of $5,450 or more, they need to file a tax return. If the child earned less than $5,450 and the employer withheld tax, file a return to claim a refund. A child under 18 pays tax at their parent's highest marginal tax rate on earned income over $1,800. The parents can elect to include the child's income in the parent's return.

Alan J. Lyon CPA specializes in tax planning, tax preparation and consulting for individuals and businesses in Santa Clarita. "It's Your Money" appears Thursdays and rotates between a handful of the Santa Clarita Valley's financial professionals. His column represents his own views and not necessarily those of The Signal.


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