1040, K-1, Schedule C…OH MY!
Today is April 14th and yes…tomorrow is the Internal Revenue Service deadline to file your 2013 Income Tax Return. TAKE A BREATH! DO NOT PANIC! Today is the 14th, not the 16th, 17th, or 18th. Your return is not late…YET. You still have time to file. There are a few things you need to keep in mind as you prepare, and file, your return.
- BE HONEST! There is a tendency for people to “bend the truth” to increase the amount of a return or to decrease the amount of money owed. Please be honest. It is a CRIME to lie on your tax return. Tax crimes are usually uncovered during an audit. At an audit, should you not be able to properly document the deductions and exemption you are claiming you can be assessed a penalty on top of what is owed AND the matter could be referred to the IRS Criminal Investigation Division. If your matter is referred to the Criminal Investigation Division, you could be charged with: (a) Tax evasion or fraud (Internal Revenue Code § 7201) which is punishable with a maximum sentence in federal prison of five years and a maximum fine of $100,000; (b) Filing a false return (Internal Revenue Code § 7206 (1)) which punishable with a maximum sentence in federal prison of three years and a maximum fine of $100,000; and (c) Failure to file a tax return (Internal Revenue Code § 7203) which is punishable with a maximum sentence in jail of one year and a maximum fine of $25,000 for each year a return was not filed. These fines and penalties do not include the cost of legal fees or the amount of time you will have to spend correcting your lapse of judgment. Just tell the truth!
- THINK! Before you hit send and transmit your return to the IRS make sure that you have reviewed your return and thought about every deduction and credit you are legally entitled to. For example, teachers are allowed to take a $250 deduction for educator expenses; homeowners who made energy efficient improvements to their homes are entitled to up to 30% of $500 of the cost of the improvement (in some cases the uppermost limit of $500 may be increased); or job seekers are entitled to claim expenses for job searching expenses. There are many other deductions and credits that you may be eligible for on your tax return. Think about who you are, your life circumstances, and what IRS deductions and credits will help you.
- ASK FOR HELP! Do not send your tax return if you are unsure. You will be held responsible for a mistake on your return. The IRS may correct a simple addition or subtraction error however you could be responsible, and face a penalty, for filing a negligent return. If you are not sure whether or not you should file a 1040EZ or a 1040 or if you don’t know the difference between a Schedule A and a Schedule C or if your K-1 form looks like Greek, then get help! There is no shame in taking all of your tax documents to a tax preparer and asking them to complete your taxes for you. Yes, this will cost you a fee that you feel is unreasonable but is not it better to pay a tax preparer to get your taxes done correctly instead of paying the IRS a penalty or facing a criminal charge? Additionally, most if the commercial preparers have an option insurance policy (available at a nominal cost) that will pay any additional tax should the preparer have made an error. (A WORD OF CAUTION: Should you use a tax preparer please use a reputable company. Be very wary of tax preparers that operate in the back of liquor stores, that tell you to take deductions or exemptions for which you have no proof, or that are not accessible year round.)
- GET AN EXTENSION! So you know there is no way you will be able to finish your taxes by tomorrow. File for an extension. A six-month extension is automatic but must be filed by the April 15th filing deadline. Filing for an extension ONLY gives you an extension on the time you have to file the return; it does not extend the time you have to pay any tax that is due. You will owe interest, and possibly penalties, on any tax you may owe.
April 15th is a very stressful day for many people. Remember that most people file taxes every year and get through it just fine. You can get through it as well!