By Paul N. Gada, CCH Business Owner's Toolkit Staff Writer
Mercifully (or unmercifully), this year's April 15 tax deadline has come and gone. Unfortunately, the same cannot be said for our continuing obligations as taxpayers. With another tax filing season less than a year away and while your psychological scars are still fresh, please consider these lingering tax-related issues.
For some taxpayers (and hopefully you know who you are), the 2003 filing season is technically not over yet. If you're a calendar year taxpayer that filed IRS Form 4868 for an automatic four-month filing extension, you have until August 16, 2004, to get your act together and file your required tax forms. If you need additional time beyond the automatic four-month extension, you can ask for more time later by writing a letter of explanation to the IRS or by filing Form 2688. However, you must justify the need for the extra time and seek prior approval from the IRS.
Similarly, you can't put your 2003 tax year entirely behind you if you reported something incorrectly and need to file an amended return (IRS Form 1040X). Although the IRS usually corrects math errors or requests missing forms, you should file a Form 1040X if there was a mistake involving your filing status, total income, or claimed deductions or credits. To avoid losing out on any refund related to amending your tax return, Form 1040X must be filed within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
Aside from wrapping up the 2003 tax season, there is also the 2004 tax year to consider. Rather than trying to repress your painful memories, try to learn from this year's tax season. With only a little extra investment of your time, you can use your experiences to help guide you through the rest of the tax year and into next tax season.
Tax filing insights can come in various forms, but just about all of them can be grouped into two categories: those dealing with the mechanics of your filing method and those that should be tied to your overall tax planning for the year.
The mechanics of tax filing include things like your ability to easily find the records and files you need, your method of preparing your taxes (e.g., software, professional tax preparer, etc.), and anything else necessary to complete and mail your tax return on time. When considering this category, evaluate what worked and what didn't during the last time around. Then, a la Scrooge, commit to mending your evil ways and make any necessary changes in the coming year.
As far as tax planning goes, knowing where you've been can help get you to where you want to go, especially if you're self-employed. In other words, seeing how you came out on your last tax return can help alert you to changes that need to be made to minimize your tax burden next time.
For example, if you underpaid your estimated taxes and paid a penalty or overpaid your taxes and got a huge refund (after giving Uncle Sam free use of your money), you should adjust your tax payments throughout this year accordingly. You might also want to explore the different deductions and credits available to lower your overall tax bill, like investing in a retirement plan or making purchases for your business.
If you had a more difficult tax season than usual, remember to plan now to prevent history from repeating itself next year. For now, though, you may resume your post-tax filing celebration.
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- The Clock Is Ticking on Tax Savings
- Tax Considerations Can Complicate Market Gains, Losses
- FICA Taxes Will Barely Increase for High Earners in 2004
- Tax Rate Projections for 2004
- Third Largest Tax Cut Package Enacted
- Congress Passes $350 Billion Tax Cut Bill
- Retirement Planning in a Down Market
- Who Really Pays Income Taxes?
- States Face Growing Budget Gaps, Half Eyeing Tax Increases
- Analysis of Bush's 2003 Tax Cut Proposal
- New Year Rings in New Tax Laws
- It's Not Too Late To Lower Your Taxes for This Year and Next
Added to the news on April 26, 2004.
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