If You Missed the Tax Deadline These Tips Can Help

April 15 has come and gone. If you didn’t file a tax return or an extension but should have, you need to take action now. Here are some tips for taxpayers who missed the tax filing deadline:

• File as soon as you can.  If you owe taxes, you should file and pay as soon as you can. This will stop the interest and penalties that you will owe. There is no penalty for filing a late return if you are due a refund. The sooner you file, the sooner you’ll get it.
• E-file your taxes.  No matter who prepares your tax return, you can use IRS e-file through Oct. 15. E-file is the easiest, safest and most accurate way to file your taxes. The IRS will confirm that it received your tax return.
• Pay as much as you can.  If you owe tax but can’t pay it in full, you should pay as much as you can when you file your tax return. Pay the rest of the tax you still owe as soon as possible. Doing so will reduce future penalties and interest.
• Use the IRS.gov tool to pay over time.  If you need more time to pay your tax, you can apply for an installment agreement with the IRS.
• A refund may be waiting.  If you are due a refund, you should file as soon as possible to get it. Even if you are not required to file, you may still get a refund. This could apply if you had taxes withheld from your wages or you qualify for certain tax credits. If you do not file your return within three years, you could lose your right to the refund.

For help, contact us. We can advise you as to the best path to take.

In most cases, you must make estimated tax payments if you expect to owe $1,000 or more in taxes for the year—over and above the amount withheld from your wages. In some cases, though, the $1,000 trigger point doesn’t matter.

• If your prior year Adjusted Gross Income was $150,000 or less, then you can avoid a penalty if you pay either 90 percent of this year’s income tax liability or 100 percent of your income tax liability from last year (dividing what you paid last year into four quarterly payments). This rule helps if you have a big spike in income one year, say, because you sell an investment for a huge gain or win the lottery. If wage withholding for the year equals the amount of tax you owed in the previous year, then you wouldn’t need to pay estimated taxes, no matter how much extra tax you owe on your windfall.
• If your prior year’s Adjusted Gross Income was greater than $150,000, then you must pay either 90 percent of this year’s income tax liability or 110 percent of last year’s income tax liability.

What forms do I need to determine my estimated taxes?

To ensure you are paying the correct amount, contact us for assistance.

Don’t delay your refund by making these common mistakes on your return.

1. An UNSIGNED return.
2. A wrong social security number. For example, inserting a symbol for a number: 123-4%-6789
3. A wrong name. For example, Smidth instead of Smith.
4. Entering a wrong filing status.  For example, if divorced, do you choose SINGLE or HEAD OF HOUSEHOLD?
5. Making mistakes when claiming credits or deductions.
6. Entering a wrong bank account number.
7. Simple math errors.

To ensure you file a correct tax return, contact us and we will help.

Looking for ways to cut your tax bill? Here’s an easy one: Just file your federal tax return by April 15.

Really. That’s it. If you expect to owe money to the IRS, and you either don’t want to or just can’t afford to write that check by the deadline, file your 1040 anyway. Or at least file for an automatic six-month extension.

Otherwise, you will end up paying a failure-to-file penalty worth up to 25% of what you owe in the first place. And that’s before counting the failure-to-pay penalty and interest. Both penalties would kick in on April 16.

For the first year, the biggest hit to your wallet will be that failure-to-file penalty, which amounts to 5% of the tax owed every month — or part of a month — for five months, capping out at 25%.

The failure-to-file penalty is also capped at 25% of the tax you owe, but it accrues more slowly — at 0.5% a month for 50 months.

But when both penalties apply in the same month, the combined maximum will be 5%, instead of 5.5%.

Say you owe an additional $5,000 on your 2014 tax return. But you don’t get around to filing that return until Jan. 1, 2016 — eight-and-a-half months after the deadline.

You’ll ring in the New Year owing an additional $1,125 in failure-to-file penalties alone.

On top of that, you would owe $225 for failure-to-pay penalties, plus $133 in interest.

Your grand total: $6,483 or 30% more than you owed in the first place.

If you do apply for a 6-month extension, you will avoid the failure-to-file penalty for those six months. And you might also avoid the late payment penalty if you have already paid 90% of the taxes you owed for the year by April 15. You will, however, still owe interest on your remaining tax debt until it’s paid off.

The only way to steer clear of that is to actually pay what you owe by April 15.

Of course, like a lot of Americans, you may not expect to owe any more money on April 15 or may even be due a refund. Filing may be a pain, but do it anyway. Or at least file for an extension.

Why? First, let’s say your assumption that you won’t owe anything is wrong and it turns out you do owe money. If you don’t file, you’ll get hit with all of the above penalties plus interest.

Second, even if you’re right and you’re owed a refund, if you wait too long to file, you may lose it.

You have 3 years to claim that refund. So you have to file your 2014 income tax return by April 15, 2018 or else you will be ‘time barred’ from claiming your refund.

Gathering documents and maintaining well-organized records make it easier to prepare a tax return. They can also help provide answers if the IRS needs to follow-up with you for more information.

You will not need to send the IRS proof of your health coverage. However, you should keep any documentation with your other tax records. This includes records of your family’s employer-provided coverage, premiums paid, and type of coverage. You should keep these – as you do other tax records – generally for three years after you file your tax return.

When preparing 2014 tax returns, most people will simply have to check a box to indicate they and everyone on their tax return had health care coverage for the entire year. You will not need to file any additional forms, unless you are claiming the premium tax credit or a coverage exemption.

You will attach Form 8965, Health Coverage Exemptions to your tax return to claim a coverage exemption. Do not attach supporting documentation to the tax return. If you applied for an exemption from the Marketplace and received an Exemption Certificate Number, or you have other documentation to support your exemption claim, keep these with your tax records.

You will attach Form 8962, Premium Tax Credit to your tax return to claim the credit. Do not attach the Form 1095-A, Health Insurance Marketplace Statement that you use to complete Form 8962. Keep Form 1095-A with your tax records.

When you sell a capital asset the sale results in a capital gain or loss. A capital asset includes most property you own for personal use or own as an investment. Here are 10 facts that you should know about capital gains and losses:

1. Capital Assets.  Capital assets include property such as your home or car, as well as investment property, such as stocks and bonds.
2. Gains and Losses.  A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.
3. Net Investment Income Tax.  You must include all capital gains in your income and you may be subject to the Net Investment Income Tax. This tax applies to certain net investment income of individuals, estates and trusts that have income above statutory threshold amounts. The rate of this tax is 3.8 percent. For details visit IRS.gov.
4. Deductible Losses.  You can deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.
5. Long and Short Term.  Capital gains and losses are either long-term or short-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long-term. If you held it one year or less, the gain or loss is short-term.
6. Net Capital Gain.  If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a net capital gain.
7. Tax Rate.  The capital gains tax rate usually depends on your income. The maximum net capital gain tax rate is 20 percent. However, for most taxpayers a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gains.
8. Limit on Losses.  If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.
9. Carryover Losses.  If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they happened in that next year.
10. Forms to File.  You often will need to file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to fileSchedule D, Capital Gains and Losses with your tax return.

Even if you’ve never paid the Alternative Minimum Tax, before, you should not ignore this tax. Your taxes may have changed so that this may be the year that you need to pay AMT. You may have to pay this tax if your income is above a certain amount. AMT attempts to ensure that taxpayers who claim certain tax benefits pay a minimum amount of tax.

Here are some things that you should know about the AMT:

1. When AMT applies.  You may have to pay the AMT if your taxable income, plus certain adjustments, is more than your exemption amount. Your filing status and income determine the amount of your exemption. In most cases, if your income is below this amount, you will not owe AMT.
2. Exemption amounts.  The 2014 AMT exemption amounts are:
   • $52,800 if you are Single or Head of Household.
   • $82,100 if you are Married Filing Joint or Qualifying Widow(er).
   • $41,050 if you are Married Filing Separate.

You will reduce your AMT exemption if your income is more than certain limits.

3. Use IRS e-file.  Keep in mind that AMT rules are complex. The easiest way to prepare and file your tax return is to use IRS e-file. The tax software you use to e-file will figure AMT for you if you owe the tax.
4. Try the tool.  Use the AMT Assistant tool on IRS.gov to find out if you need to pay the tax.
5. Use the right forms.  If you owe AMT, you usually must file Form 6251, Alternative Minimum Tax – Individuals. Some taxpayers who owe AMT can file Form 1040A and use the AMT Worksheet in the instructions.

Tax scams take many different forms. Recently, the most common scams are phone calls and emails from thieves who pretend to be from the IRS. They use the IRS name, logo or a fake website to try to steal your money. They may try to steal your identity too. Here are several tips from the IRS to help you avoid being a victim of these tax scams:

The real IRS will not:

• Initiate contact with you by phone, email, text or social media to ask for your personal or financial information.
• Call you and demand immediate payment. The IRS will not call about taxes you owe without first mailing you a bill.
• Require that you pay your taxes a certain way. For example, telling you to pay with a prepaid debit card.

Be wary if you get a phone call from someone who claims to be from the IRS and demands that you pay immediately. Here are some steps you can take to avoid and stop these scams.

If you don’t owe taxes or have no reason to think that you do:

• Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
• You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” to the comments of your report.

If you think you may owe taxes:

• Ask for a call back number and an employee badge number.
• Call the IRS at 800-829-1040. IRS employees can help you.

In most cases, an IRS phishing scam is an unsolicited, bogus email that claims to come from the IRS. They often use fake refunds, phony tax bills, or threats of an audit. Some emails link to sham websites that look real.  The scammers’ goal is to lure victims to give up their personal and financial information. If they get what they’re after, they use it to steal a victim’s money and their identity.

If you get a ‘phishing’ email, the IRS offers this advice:

• Don’t reply to the message.
• Don’t give out your personal or financial information.
• Forward the email to phishing@irs.gov. Then delete it.
• Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.