It's Tax Time

So it’s the time of year to talk seriously about tax deadlines.  Your IRA contribution for 2011 can be made as late as April 17^th of this year.  If you’re finding out bad news about your tax bill, this is a quick fix that you can still make.  If you contribute to a Coverdell education savings account you have until April 17^th to do that. 

Your income taxes are due this year on April 17^th.  Even though April 16^th falls on a Monday, Washington D.C. celebrates Emancipation Day on that date, so they moved the tax deadline one more day.  Presumably there’s a sense of irony associated with mixing emancipation and income taxes that enabled this decision. 

While you can file for an extension if you’re not ready to file a tax return, you must PAY all taxes owed for 2011 by April 17^th.  This is a hard and fast rule.  You file for an extension using IRS form 4868.  That can be e-filed as well.  You can pay by check, or charge it through an IRS approved credit card processer.  There are fees for using a credit or debit card, so you’re better off with a check if you can do that.  Any option is cheaper than the penalties and interest for not paying.  If you can’t afford to pay the whole thing at once the IRS does allow you to apply for an installment plan using Form 9465.  Again, this is expensive, but cheaper than the alternative of not paying anything up front.  It’s also important to remember that failing to file creates a whole other set of penalties and interest.  My advice is that you file and pay what you can.

If you get an extension you have until October 15^th to get the final tax return done.  If you have a Keogh plan in place and you file an extension you can wait until October 15^th to make that contribution.  Your Keogh plan must have been up and running by January 1^st of 2012 for this to work.  If you don’t meet that criterion, you can set up a SEP-IRA. 

Let me emphasize one more time how important it is to timely file and pay.  If you make mistakes it’s much easier to get them fixed if you can point out to the IRS that you tried to do the right thing.

 Back to doing tax returns….