Even if filing an extension, you still must pay your taxes on time. / Tetra Images / Getty Images / Tetra images RF
As the April 15 federal tax filing deadline nears, you may be peeking into your closet of tax anxiety. Here are top concerns:
What if I canít finish my return in time? If youíre late, bad things may happen. The IRS can hit you with a failure-to-file penalty, equal to 5% of the amount you owe per month, up to 25%. You also can be smacked with a failure-to-pay penalty, equal to half of 1% of what you owe each month, up to 25% of your unpaid taxes.
A six-month filing extension is an option, but you still have to pay your taxes by April 15. If you pay at least 90% of what you actually owe, you wonít be charged the failure-to-pay penalty. If youíre below the 90% limit, youíll owe penalties on the amount you underpay.
Is there anything in my return that could trigger an audit? The IRS tends to audit wealthier people because thatís where the money is ó and itís also because the rich often have more complex returns, especially if they are business owners.
Even if youíre not in a higher tax bracket, you could be more likely to get a love note from the IRS if you have a home-based business. Make sure you know ó and follow ó the rules for home offices and the business use of an automobile.
The easiest way to get an inquiry from the IRS? Neglect to supply a 1099 or W-2. Copies of these forms get sent to the IRS: If they donít all match up, youíll hear from your friendly neighborhood agent.
How can I make next year easier? Well, start earlier, obviously. But you can lower your taxes and increase your savings by investing in your companyís 401(k) plan or in a deductible IRA. You also can invest in municipal bonds, rather than corporate bonds, because interest from munis is free from federal income taxes. And you can sell stocks or stock mutual funds that are showing a loss ó youíll be able to use those losses against any gains you may have, and deduct up to $3,000 additional losses from your income.
John Waggoner is a columnist for USA TODAYís Money section.