With less than two weeks until tax day, millions of Americans are racing to get their tax returns done. This year’s filing season was delayed by the fiscal cliff negotiations, and the latest IRS statistics show we’re still running behind. Compared to last year at this time about 4.5 million fewer returns have been filed, a difference of 5 percent.
It’s easy to make a mistake when you’re in a hurry. Electronic filing has eliminated most math errors. So focus on things that can lower your tax bill.
“The mistake I most commonly see is the error of omission,” said Mark Steber, chief tax officer at Jackson Hewitt Tax Service. “In their rush to get their taxes done, a lot of people forget deductions or credits that could save them money."
According to the IRS about 20 percent of the taxpayers who qualify for the Earned Income Tax Credit, which can mean several thousand dollars for low- and moderate-income taxpayers, don’t claim it. (IRS Q & A: Earned Income Tax Credit)
“The IRS is there to make sure you pay what you owe, they are not set up to make sure you get the maximum refund you deserve,” Steber explained. "Your goal is to get the biggest refund you are legally entitled to."
Chances are your deductions changed if you got married, divorced, had a baby, adopted a child or bought a home in 2012. You may also qualify for a new deduction or credit if you're caring for a dependent parent, you or your spouse started a business or went back to school.
Some other commonly overlooked deductions for those who itemize: student loan interest paid, union dues, required uniforms and some work clothes, tools bought for use on your job, business gifts up to $25 per customer or client, fees for tax preparation and penalties for closing a Certificate of Deposit before maturity. (IRS: Exemptions and Deductions)
The tax experts at Jackson Hewitt and TurboTax provided these answers to some commonly asked tax-filing questions.
What if I was out of work in 2012?
Unemployment compensation is fully taxable. If you were unemployed during the year, you will probably need to file a tax return. If you did not have enough withheld during the year or if you did not make quarterly estimated tax payments, you may also owe an underpayment penalty.
Can I deduct the cost of searching for a job?
If you itemize, you may be able to deduct many expenses related to your search: printing resumes, fees for employment and outplacement agencies, career seminar costs and business-related travel. Moving expenses relevant to your job search may also be deductible if you meet the distance and time test.
What if I started a business during 2012?
If you or your spouse started a business or offered your services as a consultant while looking for a new job, your income is considered self-employment income. If you earned $400 or more this way, you must pay self-employment tax on that income. (IRS: Self-Employment Tax)
Does healthcare reform impact my 2012 taxes?
“There’s been a lot of confusion about healthcare reform and taxes,” said Lisa Greene-Lewis, lead CPA for the American Tax & Financial Center at TurboTax. “Rest assured that the requirement to purchase healthcare insurance (which starts in 2014) does not impact your 2012 taxes.”
What should I do if I owe the IRS money?
You can authorize an electronic debit from a checking or savings account. You can also pay via debit or credit card, but there is a fee for that. If you can’t pay the full amount, file your return and contact the IRS to find about payment options, such as an installment agreement.
What about filing an extension?
Speak with a tax preparer; you may have everything you need to file on time. An extension of time to file a tax return does not extend the time to pay. Taxpayers who do not file by tax deadline must file IRS Form 4868 and pay at least 90% of any tax liability they owe to avoid penalties and interest.
Will filing my return on April 15 lower my chances of being audited?
This is a common tax myth. Filing last minute has no impact on your audit risk.
- More Information:
Tax Break: The TurboTax Blog
IRS: Where’s My Refund?
IRS: What if I can’t pay my taxes?
IRS: Extension of time to file tax return