Don't Mess With Taxes

If you've put off your tax filing until this last weekend before the absolutely final extended tax deadline of Oct. 17, don't panic. You've still got a little bit of time to do the tax job right.

Image courtesy National Taxpayer Advocate

Tax Day for ultra-procrastinators is just days away. Monday, Oct. 17, to be precise.

There's no way to make up for lost tax time on this final filing weekend. But these 8 last-minute extended filing tips plus one for next filing season can help you finally get the job done on time.

1. Get your tax documents in order.
You know that stack of tax material you put in a drawer or box or, if you've gone digital, in one online folder, go through it now. Make sure you have all the info you need to file. If you don't, you need to contact issuers today, either by phone or online, to get the necessary documentation. This includes 1099s, W-2s, account statements, and other items in this checklist.

If you just can't locate the tax material by now, you're going to have to file on the 17th using the best information available and then, when you do track down the final data, file a correct amended Form 1040-X. Yes, that could cost you, but probably not as much as a nonfiling penalty.

2. Decide which deduction method to use.
Most people who put off tax filing do so because their returns are more complicated. And a lot of them still itemize instead of claiming the standard deduction. Go through your tax statements and documentation (from tip #1) again. You might find your itemizing amounts aren't what you expected.

If your planned Schedule A claims don't come to more than your standard deduction, then go with the standard amount for your filing status. That will shave time off your extended filing task.

For 2021 returns, the standard deduction is —

• $12,550 for individual filers, including those who are married and file separately,
• $18,800 if you're a head of household taxpayer, and
• $25,100 if you and your spouse file a joint tax return.

3. Don't overlook special COVID-19 tax breaks.
Regardless of which deduction amount you choose, make sure you don't shortchange yourself. Every year too many taxpayers overlook tax breaks. Don't be one of them.

There are three special coronavirus pandemic prompted tax breaks available on 2021 tax year returns. They are the Recovery Rebate Credit (RRC); the expanded Child Tax Credit (CTC); and the enhanced Earned Income Tax Credit (EITC). This is your last short for the RRC, and possibly the larger CTC and EITC if Congress doesn't extend them, so you don't want to miss out on the money.

As credits, these tax breaks provide direct dollar-for-dollar offset of any tax due. They also are at least partially refundable, meaning if you have excess amount left after claiming the applicable credits, you get it as a refund.

You claim your CTC amount, which could be as much as $3,600 per eligible child age 5 or younger and $3,000 for your dependents ages 6 to 17, by calculating the amount on Schedule 8812 and transferring it to your Form 1040. The schedule's instructions (as well as your tax pro or tax software) has more.

Any RRC, which is the official name for the third round or COVID economic impact payments issued in 2021, you didn't receive also is claimed on Form 1040, line 30. The form's instructions, as well as the IRS' online RRC fact sheet (or your tax pro or tax software) has more on this claim.

The EITC was created to help reduce the amount of tax owed for low- and moderate-income wage earners. However, only 4 out of 5 eligible taxpayers every year claim the EITC, according to the Internal Revenue Service. That's too bad, especially for the 2021 tax year.

Provisions in the COVID-prompted American Rescue Plan Act (ARPA) of 2021 made the EITC available to more people, and increased the credit's amounts.

The EITC maximum for qualifying single, no-children taxpayers is $1,502. That's almost triple the pre-ARPA amount. As for EITC eligible taxpayers in the other your filing statuses, the maximum EITC amounts with the ARPA changes are:

• $3,618 for those with one qualifying child,
• $5,980 for two qualifying children, and
• $6,728 for taxpayers with three or more qualifying children.

4. Don't miss out on the usual tax breaks.
You say you already got your full advance CTC and EIP amounts last as part of the IRS distribution. You also don't qualify for the EITC. No problem. There are lots of other tax breaks that could pay off at filing time. Check out these tax breaks that many filers overlook, as well as these 25 above-the-line tax deductions available to taxpayers regardless of which deduction method they use.

You can find more tax breaks in the ol' tax blog's monthly collections of featured tax tips.

5. Don't make common filing mistakes.
Everyone agrees that tax filing is tedious and confusing, but don't make things worse by making some easily avoidable mistakes. That will just compound and, pardon the timing pun, extend your tax hassles. Double check your 1040 to ensure you don't make any of these 12 common tax filing mistakes.

You can find more mistakes to avoid in, déjà vu, the ol' tax blog's monthly collections of featured tax tips.

6. File electronically.
Regardless if you file early, on April's Tax Day, or the October extended due date, you should submit your return electronically. Not only will the software walk you through the process and auto-fill the appropriate related forms, it will do the math for you (see mistakes in tip #5 above).

Once the IRS gets your e-filed 1040, it will process your tax return more quickly. That means if you're getting a refund — yes, taxpayers due refunds do sometimes delay filing; I don't understand it either — you'll see that money sooner. You'll get it even more quickly if you also tell the IRS to directly deposit your refund into a financial account.

You can file electronically in one of three ways. First, by hiring a tax preparer who's an IRS-authorized e-filer. Second, by using tax preparation software you buy for your computer or use online. Third, by using Free File tax software available to filers with adjusted gross incomes of $73,000 or less. Free File is available through Oct. 17.

7. Pay what you owe.
When you got your filing extension, you should have paid any tax you knew you would owe. But sometimes even our best tax guesstimates are off. If you find in finishing up your 2021 tax return that you owe more to the U.S. Treasury, pay using one of the IRS' various payment options, most of which can be completed electronically. If your tax bill is waaayyy big, the IRS also offers several options to those who can't pay a tax bill in full.

8. File your state taxes.
Residents of 42 states and the District of Columbia also face income taxes in those jurisdictions. And most of those states also allow residents who got federal tax filing extensions more time to file their state returns since, in most cases, states use federal filing information as a starting point for their returns.

Time is almost up for those state filings, too. The good news, though, for taxpayers who must file state returns, is that most states also offer free online tax filing options.

9. Get ready for 2022.
I know, you just finished your 2021 taxes. But do you want to do this all over again next year, which is just 10 weeks away? Now is the time to get organized for your 2022 tax filing.

Review your 2021 return and see how what it reflects compares to your 2022 tax and financial situation. Do you need to adjust your withholding now? Has your personal life changed, meaning more potential deductions?

Set up a record-keeping system. If you get things in order early, you might not need the extra time, or at least not all of it down to the final extended October due date.

Start looking for tax pro who can help you through the process next year. The good ones' client lists fill up quickly.

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