Mercifully (or unmercifully), this year’s April 17 tax deadline has come and gone. Unfortunately, the same cannot be said for our continuing obligations as taxpayers. With another tax filing season less than a year away and while your psychological scars are still fresh, please consider these lingering tax-related issues.
For many taxpayers (and hopefully you know who you are), the 2006 filing season was extended beyond the April 17 filing deadline for various reasons. For example, the IRS allowed victims of the major storm affecting several Northeastern states to file their returns by April 26 without incurring late-filing and payment penalties. In addition, the IRS extended the deadline for filing returns to midnight April 19 for taxpayers and tax professionals who were unable to file their returns due to the Intuit server problem that arose in the evening of April 17. Those affected included users of Turbo Tax, ProSeries, Lacerte and Turbo Tax Freedom.
Also, if you’re a calendar-year taxpayer who filed IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, for an automatic six-month filing extension, you have until October 15, 2007, to get your act together and file your required tax forms.
Similarly, you can’t put your 2006 tax year entirely behind you if you reported something incorrectly and need to file an amended return (IRS Form 1040X). Although the IRS usually corrects math errors or requests missing forms, you should file a Form 1040X if there was a mistake involving your filing status, total income or claimed deductions or credits. To avoid losing out on any refund related to amending your tax return, Form 1040X must be filed within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
Aside from wrapping up the 2006 tax season, there is also the 2007 tax year to consider. Rather than trying to repress your painful memories, try to learn from this year’s tax season. With only a little extra investment of your time, you can use your experiences to help guide you through the rest of the tax year and into next tax season.
Tax filing insights can come in various forms, but just about all of them can be grouped into two categories: those dealing with the mechanics of your filing method and those that should be tied to your overall tax planning for the year. The mechanics of tax filing include things like your ability to easily find the records and files you need, your method of preparing your taxes (e.g., software, professional tax preparer, etc.) and anything else necessary to complete and mail your tax return on time. When considering this category, evaluate what worked and what didn’t during the last time around. Then, a la Scrooge, commit to mending your evil ways and make any necessary changes in the coming year.
As far as tax planning goes, knowing where you’ve been can help get you to where you want to go, especially if you’re self-employed. In other words, seeing how you came out on your last tax return can help alert you to changes that need to be made to minimize your tax burden next time.
For example, if you underpaid your estimated taxes and paid a penalty or overpaid your taxes and got a huge refund (after giving Uncle Sam free use of your money), you should adjust your tax payments throughout this year accordingly. You might also want to explore the different deductions and credits available to lower your overall tax bill, like investing in a retirement plan or making purchases for your business.
If you had a more difficult tax season than usual, remember to plan now to prevent history from repeating itself next year. For now, though, you may resume your post-tax filing celebration.
Provided courtesy of the Business Owner’s Toolkit. With an emphasis on problem solving, the Business Owner’s Toolkit™ (www.toolkit.com) offers more than 5,000 pages of free cost-cutting tips, step-by-step checklists, real-life case studies, startup advice and business templates to small business owners and entrepreneurs. ©1995-2007, Business Owner’s Toolkit – A Wolter’s Kluwer Company.