Last Minute Tax Tips
CHICAGO (WLS) -- April 15 seems to creep up every year. And whether you've already filed your taxes, or are scrambling to finish in time, it's important to to file correctly, while receiving the best return possible. Joan Jensen, CEO and President of Central Credit Union of Illinois, talked with ABC 7 about the best ways to file taxes mistake free.
TIPS:
Get It Right The First Time: While e-filing and tax preparation software can help the last minute filers avoid many some of the common errors, knowing the most common mistakes can help you avoid them and any associated penalties. Remember, if you make a mistake, the IRS may need to contact you to correct it, which can cause a delay to both your filing and any refund.
1) Check It Out on IRS.gov: The site may not be not fun reading, but it is a great site with a good search engine for answering your tax questions. For example, it can help you determine your filing status and whom you can claim as a dependent. It may not be obvious if you should file as Head of Household or Single. You may also not know if you can claim a grandchild or a college age child as a dependent. Check the IRS site so you can file correctly.
2) Don't Miss Credits and Deductions that will reduce your taxes. Many people overlook the Earned Income Tax Credit, the Child and Dependent Care Credit, and standard deduction. More information can be found under the "Credits & Deductions" tab at IRS.gov.
3) Double Check Bank Account Numbers you use for receiving a direct deposit refund. Using direct deposit is the fastest and safest way to get a tax refund, but be sure the number is correct and the name on the account is the same as on the return. Because of problems with fraudulent tax returns, financial institutions are returning some tax refunds if the name on the refund doesn't match the name on the account.
4) Extend Your Time if you need more time to get it right. Filing for an extension is easy. Use Form 4868 to automatically extend your filing time to October 15, 2015. This simple form and instructions can be found at IRS.gov. You can file for an extension electronically or by paper. But, if you think you owe taxes, estimate how much you will need to pay and send in a payment large enough to cover your taxes. If you don't mail the payment by April 15, you will be assessed a penalty and interest on the amount due.
Maximize the Benefits of Your Refund: The average IRS refund is more than $3,000. While it is tempting to spend it on a splurge, a better decision is to put your refund to good use and boost your financial well-being. Here are some options for making the most of your refund:
1.) Reduce Debt and Interest Payments. Paying down high interest rate credit cards charging double digits is better than parking your money in a low interest rate savings account. Reducing credit card debt will also free up funds in your budget and enable you to save more in the coming year.
2.) Rainy Day Insurance. Emergencies happen. Rather than relying on the credit cards to cover the new tires or tablet replacement, open a readily available (liquid) "emergency only" account.
3.) Go ROTH. Many agree, this may be the single best way to maximize a refund. While contributions do not reduce tax liability, the money comes out tax free down the line.
