IF you have not filed your income tax returns by the end of March, chances are you do not expect a refund, your tax records are a mess, or you simply do not want to break tradition.
Just remember that filing extensions is not exactly a nice habit. Besides prolonging your worries, it also extends your own statute of limitations within which the IRS can audit you. If you file your 2015 tax returns by April 15, 2016, the IRS has until April 2019 to audit you. If you request for an extension and file by October 2015, the IRS has an extra six months to October 2019 to snoop at some items that you may not want disturbed. If you fail to file a return, there is no statute and therefore no end to when the government can examine your returns.
Having primed you up to beat the tax deadline, here are some Tylenol caplets for you:
1. If you are missing a W-2 from an employer who moved or closed shop, use Form 4852. Use your last pay stub that shows year-to-date earnings and withholdings to complete Form 4852 and attach it to the front of your return.
2. If you have not received a 1099 (that you do not want anyway), estimate your 1099 income with no withholding and report that in line 22 of your federal tax return.
3. Check the recipient I. D. number on your 1099s for commissions and independent contract income (without withholding). For example, if you have a corporation with its own federal identification number and the payor erroneously issued a 1099 to your Social Security Number, ask the payor to reissue a corrected 1099. That erroneous 1099 causes an unreported income by you personally and could trigger an unnecessary correspondence (or even an audit) on Form CP2000.
4. You can still contribute to an IRA by April 15, 2016 and claim it for 2015 even if you did not open an IRA account last year. In fact, the funds do not even have to be physically received by the bank by April 15. In a recent Letter Ruling, the IRS stated that an IRA contribution that is mailed to a bank is considered made on the postmarked date, not on the date the bank actually receives it. Therefore, a contribution mailed April 14 but received by the bank on April 15 can still count as an IRA deduction for 2015. Use certified mail.
5. Set up a SEP (Simplified Employee Pension Plan). You may set it up after 2015 just like a KEOGH and fund it by the extended due date of the return.
6. Do not forget to deduct property taxes and state income taxes due in 2016 but prepaid in 2015.
7. For many of you who were forced to pay mortgage prepayment penalty for refinancing high interest bearing trust deeds, now is the time to recoup that expense. Deduct the penalties as interest expense for 2015.
8. You may also deduct penalties for premature withdrawal of time certificates of deposits.
9. Review your filing status. Filing a joint return almost always results in a lower tax bite. Study the possibility of filing as Head of Household if you have a dependent child and your spouse was not a member of your household from July to December or if you are supporting a parent.
10. Do not forget tax credits (Child Tax Credit, Earned Income Credit, Hope and Lifetime Credits) to reduce your tax bite.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].
