Tax Tips for You Last-Minute Filers

The filing deadline has been extended three days this year because the typical April 15 deadline falls on a District of Columbia holiday. You now have until April 18 to file your taxes. While three more days may seem like a lot of time – it isn’t.

The best advice to those who have not filed their tax returns yet is simple: Get your information together as soon as you can.

While you want to get everything in as soon as you can, you don’t want to miss any deductions. Here are some of the most commonly missed deductions:

1. State tax refunds: If you itemized your deductions last year, this could be income. If you did not, or if you filed an alternative minimum tax (AMT), this is not considered taxable income.
2. Charitable donations: You may not deduct any time or labor, but you may include mileage and even the cost of providing something to a charitable organization. Make sure you have documentation to support your deduction, as it is often an area of further inquiry from the Internal Revenue Service.
3. Health insurance premiums for self-employed individuals: For 2010 only, self-employed individuals may deduct these costs against the self-employment tax.
4. Medical expenses: You may deduct them to the extent they exceed 7.5 percent of your adjusted gross income (AGI).
5. Sales tax: Most Michigan residents who itemize will take a deduction on Schedule A for state and local income taxes paid, but do not forget that you can take the higher of this or any sales tax you paid in 2010. People most likely to benefit from this include those who paid sales tax on a large purchase in 2010, such as a car or a boat.
6. Moving expenses: If you moved more than 50 miles for your job, you can deduct the reasonable costs of moving.
7. Domestic production deduction: Sole proprietors, partnerships and corporations who produce in the U.S. may claim this benefit. 

While most items on your taxes are in the past and there is little you can do to reduce your current (2010) tax bill now, there are a couple of items that can affect next year's bill:

1. Contribute to a traditional Individual Retirement Account (IRA): This option is available to those who are eligible and allows you to reduce your taxable income by the amount you contribute (subject to limitations). You may make eligible contributions through April 18 for the 2010 tax year.
2. Contribute to your Health Savings Account (HSA): You can deduct up to $3,150 for a single filer or $6,150 per family if you had a qualifying health plan in 2010. You may make eligible contributions through April 18 for the 2010 tax year.
3. Simplified Employee Pension Individual Retirement Account (SEP IRA) and other pension plans: Unlike IRAs, these contributions can be made up until your tax return is filed (Oct. 17 for those filing extensions).

Oftentimes, taxpayers will indicate that instead of filing their taxes by the deadline, they would like to file for an extension because they owe. Keep in mind, however, that the IRS does not extend the deadline for payment due; an extension just allows the taxpayer to file the paperwork later.

If you find that you owe taxes, there are many ways to pay — and you do not want to get caught up in not paying, because the penalties are steep.

The IRS offers these alternative methods (as opposed to paying with a check or your payment voucher) to pay your taxes:

1. Additional time to pay based on circumstances may be granted through an online payment agreement application that can be obtained by visiting irs.gov or by calling 800-829-1040. I have to warn taxpayers that circumstances must be documented and are rarely granted.
2. Installment agreement: You can apply for this (at a cost) by filling out Form 9465 with your initial payment for balances less than $25,000. See Tax Topic 202 for further information on this program by visiting irs.gov.
3. Credit card: You can charge your taxes on most major credit/debit cards that have an arrangement with the IRS. You will pay a fee for this. Go directly to the processing company’s site for this option. Visit irs.gov for more information.

Lastly, there is some advice for the proper processing of your return. 

1. Electronic filing is the fastest and most secure way to have your refund processed. The IRS has indicated that if you file electronically and the government does shut down, the processing of these returns will not stop (i.e., your refund will not be held up).
2. Have your refund directly deposited into your checking account. This speeds up the delivery of your refund and ensures that it will not get lost in the mail.

If you have any questions or if you need any tax help, feel free to reach out to dhoppe@smcpafirm.com.

David H. Hoppe, certified public accountant, submitted these tax tips. Although he lives in St. Clair Shores, he's a Ferndale Patch reader and Ferndale frequenter.