What tips do you have for those of us who have procrastinated on our taxes?
This is becoming a tradition. Today, we are 15 days away from the filing deadline, because this year it is April 18. For those of you who are last minute filers out there, that gives you an extra weekend to get them done, because for the second year in a row, the deadline has been extended because it falls on a weekend, and Monday, April 16 is Emancipation Day in Washington, DC. So, if you haven’t filed yet, we have some tips for you this morning.
Great. We still have ransomware on the mind from last week’s segment. If we are just starting our taxes, how do we avoid tax scams?
Great question. Phishing scams will often come through your email inbox this time of year, as scammers pose as legitimate tax filing sites or even the IRS, seeking access to your important personal and financial information. As I said last week, do not click!
Any links you receive or websites that require you to share information should be avoided unless you are certain they are legitimate. If you must access a site, navigate directly to the site by typing the address in to your browser.
And remember: the IRS will not initiate contact with you by email or phone to discuss your account, and they certainly will not threaten arrest or other punishments. If you are unsure, call the IRS directly. Again, the best defense against most online scammers is to avoid suspicious links or sites and not share your information.
For our listeners who are a little behind, remind us what we need to file our taxes.
You will need to get a hard copy of the following documents: your W2 form, which documents compensation from your employer, or 1099s if you are self-employed; any documents that will allow you to declare deductions, like receipts for donations you made, tuition bills, or invoices for child care expenses, all of which are deductible. You also want to gather copies of your investment statements showing your retirement and other contributions in 2016. These are the key documents you will need to file your 2016 taxes.
Beyond that, it is a good practice to gather all your important family documents – marriage licenses, custody agreements, wills, and property records like deeds – in case you are audited.
Are there resources out there we can use at this point to help us make the deadline?
Yes. We talked about a couple of these resources earlier this year. First, remember that the IRS has rolled out the FreeFile program this year. This program, available through the IRS website, provides free filing software for taxpayers with incomes of $64,000 or less. Seven in ten of the nation’s taxpayers are eligible for IRS FreeFile. If you are struggling to get started,
Free File software will help you go through the process step-by-step. Finally, remember that IRS Taxpayer Assistance Centers for in person assistance with your taxes are available. To schedule an appointment, you can call 844.545.5640. Taxes can be intimidating. Use the tools available to you if you need assistance.
Say I have been putting off filing because I cannot pay. Remind me what I should do.
Remember, you do not have a choice to do your taxes. You need to file, even if you cannot pay. That means going through the whole process – collecting all the paperwork, doing your calculations, and sending your returns to the IRS. If you think extra time will allow you to sort everything out, your best option is to file for an extension. Anyone can do this, but you need to submit your paperwork by April 18. To go this route, go to the IRS site and find form 4868, which will allow you to request another 6 months to finish your taxes. If you get the extension, you must file your taxes before October 15.
But, not acting at all is not an option. If you do not file or apply for an extension because you cannot pay, the IRS will charge you a failure-to-file penalty, which is usually 5% of the unpaid taxes for each month your return is late, up to 25% of your bill. If you are still unable to pay by October, there are payment plans available.
f we cut it close, are we more likely to get audited?
No, this is a myth. No one knows how the IRS selects its audits, but we do know that certain things can flag your return for further investigation. In fact, an extension might decrease your chances of getting audited, as it demonstrates you’re are taking the time to ensure that things are done correctly. But we do know that one way to get audited is to not file at all, not pay what you owe, and not asking for an extension.
Mellody is President of Ariel investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News.