Last-Minute Tax Tips
If your problem seems unresolvable—anything from trying to get a straight answer on an IRS requirement to a lost or stolen refund check—start with a problems resolution officer (PRO), a taxpayer advocate employed by the IRS to solve just such problems. To contact a PRO in your area, look in the phone book under U.S. government offices for "Treasury Department," where you should find a listing for the IRS. Try calling a local number (rather than an 800 number) and ask to be transferred to the problems resolution officer.
Make a Deal
If your taxes have piled up and you don't dispute that you owe them, but you truly cannot pay the full amount, the IRS may be willing to consider an installment plan. If your case is desperate, you may be able to make an "offer in compromise," which allows you to settle your tax bill for something less than what you owe.
Before making an offer, be sure your taxes are up to date. You must file your 2008 return. Then complete an individual financial statement— Form 433A, which details your income, expenses and cash flow—and an offer in compromise, Form 656. To get an idea of what a reasonable offer is, review other offers the IRS has accepted in the files at your local district office. (This is public information, but names are confidential.) When you agree to an offer in compromise, you must also agree that you will be current on your tax liabilities for the next five years.
Short on Cash?
Finally, perhaps you're not yet behind on taxes, but don't have enough cash on hand to pay your bill. File a return anyway. Failing to file is a more serious offense than failing to pay. "When you fail to file, there is a penalty of 5 percent a month or any fraction of a month in addition to other interest and penalties," says Wilson Fadely, an IRS spokesman. The simplest solution is to attach Form 9465, which is the installment agreement request form. Indicate an amount that you intend to pay each month. The IRS promises to respond within 30 days, indicating whether your plan is acceptable. Interest and penalties will also be due. If your plan is accepted, the IRS will bill you each month. None of this is to suggest that you should be casual about paying your taxes. But neither should you be terrified into submission when you receive a missive from the IRS. Remember that taxpayers do have rights. "We're not out to kill people," says Pat Berliner, a PRO in Long Island. "We want to work with people, to work out a schedule, to help bring them back into the system."
The most common mistakes taxpayers make are simple math errors. If you make a mistake in your return, the IRS is entitled to correct it and adjust your taxes. Some key mistakes to avoid:
Failing to list a Social Security number for each dependent
This year, if you don't provide the number—even for your baby—or provide the wrong one, the IRS will disallow the dependent.
Making a mistake on the earned income tax credit
Taxpayers with incomes under a certain level are entitled to a tax credit. But math errors in this area are rampant. If you have household income under ,646 (,646 married filing jointly) and two or more children, or income under ,995 (,995 married filing jointly) and one child, you may qualify. If you have no children, you may qualify if your income is under ,880 (,880 married filing jointly). You may also use the EITC Assistant on IRS.gov to find out if you qualify.
Failing to itemize deductions if it is to your advantage
Singles should itemize if their deductions exceed ,450; Married filing jointly, ,900; Head of household, ,000; Married filing separately, ,450.
Forgetting to file Schedule C if you are self-employed
This might include income from babysitting, running a day-care or any homebased business, no matter how small. Schedule C allows you to deduct all business expenses, including use of your home, telephone, equipment and supplies.
Forgetting to file as head of household when you qualify
Any single person who provides a home for a dependent such as a child or elderly parent may file as head of household and pay considerably less in taxes. So may a parent who provides the use of her home to a single adult child.
Video: Last-minute tax filing tips
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