More On Tax Planningfrom The Advisor's Professional Library
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
- Health Insurance: Health and Medical Savings Accounts A Health Savings Account is a trust created exclusively for the purpose of paying qualified medical expenses of an account beneficiary. Although they are popular, they are not without their pitfalls and the regulations can be complicated. Learn more about how to avoid federal taxation on the accumulation and distributions of HSA.
With only about two weeks remaining until the April 18 filing deadline, the IRS reminded taxpayers on Tuesday that they could use its Free File to do their taxes or file an extension.
The IRS said that as of March 25, it had received more than 82 million individual income tax returns, which was 58% of the 141 million returns expected this year. This is about the same number of returns it received last year at the same time, while processing of returns is up 3%.
The statement noted that 20% to 25% of all taxpayers usually file in the final two weeks of the tax season, and about 7% seek a six-month extension to file.
This year, taxpayers have an extra weekend to file because of a District of Columbia holiday. The deadline for 2011 is Monday, April 18, rather than April 15.
The IRS offered some filing tips as the final countdown begins:
- Many tax credits from the American Recovery and Reinvestment Act are available. These include an expanded American Opportunity Credit of up to $2,500 for tuition, books and fees; a larger energy credit of up to $1,500 and an expanded Earned Income Tax Credit for larger families of up to $5,666. As well, the $8,000 first-time homebuyer credit is still available for people who entered into a binding contract by April 30, 2010, and went to settlement by September 30, 2010.
- IRS Free File, brand-name software or online fillable forms, is a simple way to prepare and e-file returns. There is no charge. Software is available to the 70% of taxpayers who earn $58,000 or less. And fillable forms have no income limitations.
- Filing electronically gets a faster refund, provides secure, encrypted transmission and results in a more accurate tax return. Taxpayers can e-file through a tax preparer, through commercial software or through IRS Free File.
- Taxpayers who cannot meet the April 18 deadline can file an extension, using Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. All taxpayers can use Free File to submit a Form 4868 for an automatic six-month extension. And Free File will be available through the October 17 extension deadline for late filers.
- The six-month extension is to file a return only; it is not an extension to pay taxes due. Those unable to pay their taxes should file a tax return anyway to lessen the penalties and pay as much as they can. Then they can work with the IRS to set up a payment plan or use the Online Payment Agreement Application.
Besides Free File, the IRS offers other free tax help services through volunteers at nationwide sites. The Volunteer Income Tax Assistance sites serve taxpayers whose 2010 incomes were $49,000 or less. Tax Counseling for the Elderly sites serve taxpayers who are 60 and older.