Can't File Your Tax Return or Make Your Tax Payments on Time?

If you can't meet the April 15 filing deadline, here's what you need to know:

• An extension allows you extra time to file but is not an extension of time to pay a balance due.
• File a Form 4868 by April 15 to extend the filing deadline to Oct. 15. You should also estimate your tax liability and pay as much of it as you can before April 15. If done electronically, the IRS will acknowledge receipt of the extension request.
• If the return is done but you do not have funds to pay a balance due, do not request an extension. File your return on time and pay as much as you can. By paying as much as possible now, the amount of penalties and interest owed will be less. You will be billed for the remainder of the amount you owe. 
• To request a payment plan, include a Form 9465 with your return. This arrangement allows you to make monthly payments after a one-time fee of $105 (reduced to $52 if you make payments through Direct Debit from your bank account). If you already have an installment agreement from a previous tax debt and your financial situation has changed, the IRS may be able to modify or restructure your installment agreement to include additional amounts owed into one agreement. Additionally, a Collection Information Statement may have to be completed to further illustrate your financial situation. If an installment agreement is modified, reinstated or restructured, a $45 user fee may be charged.

Don't Panic

If you can't meet the April 18 filing deadline, here's what you need to know:

• An extension allows you extra time to file but is not an extension of time to pay a balance due. If you have not paid at least 90 percent of the total tax due by April 18 you may also be subject to an Estimated Tax Penalty.
• File a Form 4868 by April 18 to extend the filing deadline to Oct. 18. You should also estimate your tax liability and pay as much of it as you can before April 18. You can file an extension online and the IRS will acknowledge receipt of the extension request.
• If the return is done but you do not have funds to pay a balance due, do not request an extension. File your return on time and pay as much as you can. You will be billed for the remainder of the amount you owe. To request a payment plan, include a Form 9465 with your return.
• Individuals who owe $25,000 or less in combined tax, penalties, and interest are eligible for an Installment Agreement and can use the Online Payment Agreement application available on IRS.gov.

The Cliff Notes of Form 1040

A lot of taxpayers use a paid preparer when filing their return. It doesn't hurt to understand a few basic rules about Form 1040.

First you need to determine if you have To file a tax return? Once you've done that let's look at the different sections of the tax return.

Filing Status
There are five filing status available. Married taxpayers can file together (Married Filing Jointly) or apart (Married Filing Separate). Single, Head of Household, and Qualifying Widower are filing statuses for unmarried taxpayers.

3 days left to file your return

Normally today is the final day to timely file your federal income tax return. However, this year the IRS extended the deadline to April 18, 2011 because today is Emancipation Day, a District of Columbia holiday. Taxpayers requesting an extension have until Oct. 17 to file their 2010 tax returns. Now start filing.

You've claimed the exemption. Don't forget the Child Tax Credit

Taxpayers with children can claim a credit of up to $1,000 for each qualifying child. The Child Tax Credit is claimed on line 51 of Form 1040 as a nonrefundable credit . Taxpayers can use this credit up to the amount that reduces their income tax to zero.

A qualifying child for this credit is someone who meets the qualifying criteria of all six tests:

1. Age - must be under age 17 – age 16 or younger – at the end of the year.

Here's a Tip ...... about Tip Income

If you work in an occupation where tips are part of your total compensation, you need to be aware of several facts relating to your federal income taxes as outlined in IRS Publication 531.

First all tips received from customers are taxable income and must be reported on Form 1040. Tips are also subject to Social Security and Medicare taxes. The value of non–cash tips, such as tickets, passes or other items of value, is also income and subject to tax.

Total tip income includes all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip–splitting arrangement with fellow employees.

Child and Dependent Care Credit

If you paid someone to care for your child, spouse, or dependent, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. To take the credit, complete Form 2441 Child and Dependent Care Expenses, and report the amount of the credit on line 48 of Form 1040. This credit is considered nonrefundable meaning the amount of the credit can not exceed your tax on line 46 of Form 1040.

In order to claim the credit, the taxpayer must meet ALL of the following requirements:

1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.

Still time to contribute to an IRA and save money on your taxes

You still have five days left to save money on your 2010 income taxes.

Generally you can deduct contributions made to a traditional Individual Retirement Arrangement (IRA) on line 32 of Form 1040. Do not confuse a Traditional IRA with a Roth IRA, contributions to a Roth IRA are never deducted as an adjustment to income.

Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2010 must be made by April 18, 2011. Additionally, if you make a contribution between Jan. 1 and April 18, you should designate the year targeted for that contribution. Use the IRA Deduction Worksheet to figure your deduction for IRA contributions.

Do I have to make Estimated Tax Payments

You may need to make estimated tax payments if you do not pay enough tax on your income during the year.

Typically employees have taxes withheld by their employer throughout the year. For taxpayers with income from interest, dividends, alimony, rent, partnerships, self-employment and capital gains may need to make estimated payments. Taxpayers with this scenario can avoid making estimated tax payments by adjusting Form W-4 and rely on their employer's payroll department to withhold additional taxes.

In general, you must make estimated payments during the tax year if you expect to owe at $1,000 in tax for 2011 after subtracting withholding and credits, and you expect your withholding and credits to be less than the smaller of:

1. 90% of the tax shown on your 2011 tax return; or
2. 100% of the tax shown on your 2010 tax return.

Did you Take an Early Distribution from Your Retirement Plan?

Tax laws encourages taxpayers to contribute to retirement plans whether it is a plan sponsored by their employer (typically a 401k) or an individual retirement arrangement (IRA). However, taking money out of these retirement accounts before age 59 ½ is considered an early distribution and can have some serious tax consequences in the form of an additional tax of 10% on the taxable part of the distribution.

The taxpayer will receive a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. If the distribution code in box 7 is a code 1 (early distribution), the taxpayer will need to report the 10% penalty on line 58 of Form 1040.

Paying on Student Loans? Deduct the interest

A deduction of up to $2,500 may be allowed for amounts paid for interest on qualified student loans on line 33 of Form 1040. Only the actual amount of interest paid in the current year may be deductible. You may not claim the deduction in any year in which another taxpayer claims you as a dependent or if your filing status is Married Filing Separate.

A qualified student loan is a loan you took solely to pay qualified education expenses at an eligible education institution.

Use the Student Loan Interest Deduction Worksheet to see if the deduction amount is reduced or eliminated based on your Adjusted Gross Income.

Taxable or Non-Taxable Income?

Generally, most income you receive is considered taxable but there are situations when certain types of income are partially taxed or not taxed at all.

To help taxpayers understand the differences between taxable and non-taxable income, the Internal Revenue Service offers these common examples of items not included as taxable income:

• Adoption Expense Reimbursements for qualifying expenses
• Child support payments
• Gifts, bequests and inheritances
• Workers' compensation benefits

What filing status should I use?

Your federal tax filing status is based on your marital and family situation. It is an important factor in determining your standard deduction, your tax liability, eligibility for deductions and credits and whether you must file a return.

Your marital status on the last day of the year determines your status for the entire year. State law determines if a taxpayer is married or legally separated under a divorce.

If more than one filing status applies to you, you may choose the one that gives you the lowest tax obligation.

There are five filing status options:

• Single. Generally, if you are unmarried, divorced, or legally separated according to your state law as of December 31 and you do not qualify for another filing status, your filing status is Single.

Columbus TV anchor needs a new tax preparer

Just days after I published a blog post about Deducting the cost of Work Clothes and Uniforms, the Columbus Dispatch ran a story over the weekend about local TV anchor Anietra Hamper's issues with the IRS. To me this is a case of bad advice from a tax preparer.

IRS Publication 529 is clear when it comes to clothing costs. "It is not enough that you wear distinctive clothing. The clothing must be specifically required by your employer. Nor is it enough that you do not, in fact, wear your work clothes away from work. The clothing must before not be suitable for taking the place of your regular clothing."

The Clock is Ticking

If you haven't filed a prior year tax return, it's not too late. Generally, a refund can be claimed by filing the tax return within three years from the due date.

That means if you haven't filed your 2007 return, the deadline is April 18, 2011 to claim your refund. If you extended that return, the due date is October 17, 2011.

The Internal Revenue Service (IRS) announced that it has $1.1 Billion for People who have not filed a 2007 tax return.

Don't wait any longer, file your return.

Deducting the cost of Work Clothes and Uniforms

Qualified uniform expenses are the cost and upkeep of uniforms and certain articles that are:

• Specifically required as a condition of employment, and
• Not adaptable to general use as regular clothing

The deduction is also allowed for "Uniforms required by your employer that are not suitable for ordinary wear" as well as "protective clothing required in your work."

This includes protective clothing such as safety shoes, boots, safety glasses, hard hats, and work gloves. Taxpayers should look into this deduction if their occupation is a carpenter, cement worker, chemical worker, electrician, fishing boat crew member, machinist, oil field worker, pipe fitter, steamfitter, or truck driver.