Monthly Archives: January 2017

   Why we put off filing our taxes and how to stop it.

dont mess with taxesThe 2017 tax filing season has been officially underway for just more than a week. Lots of folks have already filed their returns.

And, according to ecstatic posts on social media, some have received their refunds.

Other taxpayers, however, are waiting to file.

Form-ulaic delay: Why the delay. In a lot of cases, folks haven’t yet received their W-2s, 1099s and other documents with the data necessary to fill out 1040s.

As soon as those arrive, which should be soon since today, Jan. 31, is the deadline for many tax statements to be sent, they’ll complete their 2016 tax returns.

Still others will wait until April 18 (yes, the filing deadline this year is again tailor-made for procrastinators) or even Oct. 16 (yes, the extended due day is later, too) if they file Form 4868 to get six more months to fill out the appropriate tax forms.

Such tax procrastination comes even from those who will, eventually, get refunds.

So why do we put off tax tasks? Here are three big reasons.

1. Afraid of the tax process: Fear is part of it. That’s understandable. Taxes, in general, can be — are — scary.

A lot of us are afraid of making a mistake on our taxes. That’s understandable, too.

Taxes can be complicated, even when you use tax software or hire a tax professional. And everyone, and everything, makes mistakes, including taxpayers, tax software and tax pros.

But an error or two can be corrected (yay 1040X!), either by you when you catch it early or later when the IRS finds it. It’s better to get your taxes done by deadline rather than not file at all.

And fear of tax errors can breed even more errors. By putting off your tax task until the last minute, you’re likely to find yourself in a rush, bringing to mind that old saying haste makes waste.

It’s better to give yourself (or your tax preparer) enough time to file your return as accurately as possible than to force finish your 1040 at the very last minute.

2. No money: While it’s true that some who get refunds also delay filing, most tax procrastinators owe the U.S. Treasury. If you don’t have the cash to cover that tax liability, you’re not going to be in a big hurry to fill out your return.

So you reason that by putting off your filing, you’ll have more time to come up the money to pay your tax bill. That could be true. Or not.

If you’re still short as April arrives, file by the deadline anyway and pay what you can.

Then set up a payment plan with the Internal Revenue Service to cover the rest. It’s much cheaper in the long run to pay some interest on an installment plan than to face penalties for filing late or not filing at all.

3. Habits are hard to break: Some folks are just in the habit of putting off their taxes. They fully intend to do them, but later. And later it is every year.

I can see that. If you don’t file until mid-April every year, you’ve already got that space set aside in your head and literally on your calendar to deal with your filing then.

And if you push your returns until October, the idea of doing them again early in the next year is inconceivable. You just did that a few months ago!

Justifiable document delays: Some of us have legitimate reasons for postponing tax filing.

We’re waiting for tax documents we need to complete our returns. Although most of those, like the W-2 and 1099-MISC, are required to at least be on their way to taxpayers by Jan. 31, if they’re sent by snail mail, it could take a week or so for them to arrive.

Other documents get even longer before they must be sent.

Small business owners, especially sole proprietors, also can benefit from not rushing into filing.

You need to make sure you have all your business expense receipts in order, have all the info necessary to claim your mileage and home office, and have taken advantage of your retirement plan contributions.

Extra time to add to a retirement account: While anyone with an IRA, either Roth or traditional, can contribute to that account for the previous tax year by the April filing deadline, self-employed folks have even longer.

You can open and contribute to a simplified employee pension, or SEP, retirement plan up to your return’s due date, including the October filing deadline if you sought that extra time.

Not only do the extra six months give you added days to complete your 1040 and Schedule C, you also have more time to come up with the money to go into your self-employed retirement account by the later deadline.

And it definitely is worth contributing to your self-employed retirement plan, regardless of whether you do it sooner or later, for two reasons.

First, your future retirement will be better because of your contributions today to your account.

Second, money you put into your self-employed retirement plan is an above-the-line deduction that can make a difference in lowering your tax bill.

Procrastination solutions: Regardless of why you’re putting off filing, try to understand your motivations. If they’re justified, fine. Take the time you need to do your taxes right.

But if you’re just screwing around because you simply don’t want to file, get over it. Yes, I say that to myself, too.

Then buckle down and get your tax return to the IRS. The American Institute of CPAs has some suggestions on how to stop procrastinating.

   Employers Must File Forms W-2 by January 31st

The Internal Revenue Service today reminds employers that the due date for filing Forms W-2, the Wage and Tax Statement for their employees for calendar year 2016, is now Jan, 31, 2017. Also, those who hire contract workers and have to file Form 1099-MISC now must file by Jan. 31.

The new deadline applies whether an employer e-files or files a paper Form W-2. Employers who pay an employee $600 or more for the year must file a Form W-2 for each employee with the Social Security Administration.

The new deadline is part of legislation signed into law at the end of 2015 to combat identity-theft related refund fraud.

The Social Security Administration encourages all employers to e-file their Forms W-2 by using its Business Services Online.  Employers who file paper Forms W-2 should file them with the Social Security Administration, Data Operations Center, Wilkes-Barre, PA 18769-0001.

E-filing can save time and effort and helps ensure accuracy. Employers must e-file if they file 250 or more Forms W-2 or W-2c. Employers who are required to e-file but fail to do so may incur a penalty. E-filing can save time and effort and helps ensure accuracy.

The new rule does not affect the filing deadline for other types of Form 1099 or Forms 1097, 1098, 3921, 3922, or W-2G, which are filed on paper by Feb. 28, 2018, or by April 2, 2018 if filed electronically

   The IRS Taxpayer Bill of Rights and You

Taxpayers have fundamental rights under the law. The Taxpayer Bill of Rights presents these rights in 10 categories, which can help taxpayers when they interact with the IRS. This post highlights a list of taxpayer rights and the agency’s obligations to protect them.

1. The Right to Be Informed.
Taxpayers have the right to know what is required to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to know about IRS decisions affecting their accounts and clear explanations of the outcomes.

2. The Right to Quality Service.
Taxpayers have the right to receive prompt, courteous and professional assistance in their dealings with the IRS and the freedom to speak to a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.

3. The Right to Pay No More than the Correct Amount of Tax.
Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties. They should also expect the IRS to apply all tax payments properly.

4. The Right to Challenge the IRS’s Position and Be Heard.
Taxpayers have the right to object to formal IRS actions or proposed actions and provide justification with additional documentation. They should expect that the IRS will consider their timely objections and documentation promptly and fairly. If the IRS does not agree with their position, they should expect a response.

5. The Right to Appeal an IRS Decision in an Independent Forum.
Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties. Taxpayers have the right to receive a written response regarding a decision from the Office of Appeals. Taxpayers generally have the right to take their cases to court.

6. The Right to Finality.
Taxpayers have the right to know the maximum amount of time they have to challenge an IRS position and the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS concludes an audit.

7. The Right to Privacy.
Taxpayers have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be no more intrusive than necessary. They should expect such proceedings to respect all due process rights, including search and seizure protections. The IRS will provide, where applicable, a collection due process hearing.

8. The Right to Confidentiality.
Taxpayers have the right to expect that their tax information will remain confidential. The IRS will not disclose information unless authorized by the taxpayer or by law. Taxpayers should expect the IRS to take appropriate action against employees, return preparers and others who wrongfully use or disclose their return information.

9. The Right to Retain Representation.
Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

10. The Right to a Fair and Just Tax System.
Taxpayers have the right to expect fairness from the tax system. This includes considering all facts and circumstances that might affect their underlying liabilities, ability to pay or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.
The IRS will include Publication 1 when sending a notice to taxpayers on a range of issues, such as an audit or collection matter. IRS offices display the rights for taxpayers and employees to see.
Publication 1 is available in English, Chinese, Korean, Russian, Spanish and Vietnamese.
All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.