Should I file an extension for my taxes?
If you do not have your taxes done and filed yet time is running out. Tomorrow is the due date. If you know that your taxes will not be ready by tomorrow what should you do?
You can file an extension with the IRS that will allow you an additional 6 months to get your taxes in. Sounds great right, but there is a catch: if you owe taxes and you file under the extension you will pay interest on the amount owed starting on April 16th until they are paid. However, if you owe money and file late without filing for an extension not only will you owe interest but also penalties for filing late. Not fun. Either way, if at all possible it is better to get your taxes done by the 15th to keep from paying extra.
If you are getting a refund there is no penalty for filing late, but neither will the IRS pay you interest for allowing the government to use your money.
Help! I can’t do my taxes!!
Many people today don’t know how to keep a checkbook or balance their bank statement let alone how to file an income tax return. If you are in this boat, don’t worry, there are plenty of ways to get your taxes filed without paying someone a hundred dollars to do the return for you.
The IRS websire has a list of programs designed to help tax illiterate people either file their own tax returns using easy to use software or find a program that will do simple tax returns for free. However, it doesn’t hurt to know a few key concepts just to make sure your preparer really is getting you the most money possible.
First, you need to know your filing status. The options here are single, married filing jointly (or qualified widow/widower with a dependent child), head of household, or married filing separately.
1. Single
This is for people who have never been married, are legally separated, or are widowed before January 1st of the tax year you are filing the return for (here it would be January 1, 2008) and did not remarry during the year and don’t have a legally dependent child. To claim this as a legally separated person, you need to do more than just have a fight and move out of the house, you need to take the steps required by your state of residence, ie the state that you live in, to legally separate. This can include a decree of divorce or a maintenance agreement.
2. Married filing jointly
Most married couples select this option. Couples can select this option is they married during 2008, even if they married on the last day of the year. You can also select this option if you were widowed in 2008 as long as you were married at least one day during the year.
When selecting your status, you should keep in mind that this status is determined under federal law. Same sex couples who were legally married in their state are not qualified as married for federal income tax purposes.
3. Married filing separately
Some couples elect this option because one spouse has higher itemized deductions and would get a larger return if using only that spouses income rather than both spouses. However, if you select this option you are not allowed to deduct education expenses such as tuition, fees, student loan interest or education credits, nor can you claim the earned income credit.
4. Head of Household
This status is for an unmarried person (single) who has a dependent. This dependent can be the individual’s child or close relation that the individual pays more than half the support for, including maintaining a home that the dependent lived in more than half the year.
Another great thing to know about when getting your taxes done is the earned income credit. The earned income credit is an additional tax credit for lower income people who work. Most people who qualify for this credit have at least one child.
Making Charity Work for You
Income taxes are just around the corner. You have been saving receipts all year in preparation for this moment. Once all your W-2s come in you are ready to hand the pile off to your tax manager to sort through the mess and make magic. However, there are probably some deductions that you haven’t thought about.
Charity is something that many of us do for a variety of different reasons but we don’t think about how it can affect our taxes. Did you pledge and pay money for someone to run for charity? Did you pay tithes to your local church? Did you donate a toy to your local toy drive? Each of these items is a charitable deduction that you can count on your taxes if you itemize.
Not only is the money donated to a charity deductible, so are goods. Those clothes that you dropped off at Goodwill are deductible just as much as the money you gave to the Red Cross. However, that isn’t everything. If you donate your time to a charitable organization you can track and deduct the mileage. In 2008 and 2009 the government is allowing a charitable deduction of 14 cents a mile for every mile driven to and from a charity where you donate your time. While you can’t donate the mileage of driving to Goodwill to drop of those clothes that no longer fit, if you donate your time once a month to help out at the local Salvation Army or Humane Society you can donate the miles for those trips.
Keep track of the miles you have when you leave the house to do your charitable work and the miles you have when you get back to document your deduction and make sure to let whoever does your taxes know about the mileage. For the mileage to qualify, the charity must be a 501(c)(3) tax-exempt organization.