Boatman: Keep these tips in mind as tax day nears
Many people are still working on completing their 2012 income taxes. The final filing date is April 15.
If you have not completed your return by then, you can file for an automatic 180-day extension. You still must pay the estimated taxes by April 15 or you will be charged penalty and interest. Make sure that you report all of the income that is listed on your 1099 and W-2's or you will set off a red flag with the IRS. Their computers are set to look for at least that many dollars of income. They receive copies of all of your reports.
Millions of Americans are surprised when they receive a 1099-C from a creditor or collection company. If you receive debt forgiveness of more than $600, you must pay income tax on this reduction. Many companies do not tell debtors that they will owe this tax and some people throw away the form thinking they have already settled the debt. Let's say you owed the creditor $15,000 and you settle the account for $10,000. If you are in the 15 percent income tax bracket, you owe the government $750. This is a common occurrence since the IRS expects 6.5 million taxpayers to be subject to this for 2012.
There are a few debts that are exempt from these taxes. They are debts discharged in bankruptcy court, mortgage debt forgiven in foreclosure and when you are declared insolvent.
Tax time is a big time of year for identity thief. The IRS will never contact you by e-mail. Be wary of any such request for information. Many scammers file fake returns and try to get a refund sent to them. This is one of the reasons it might be better to file early. That way, if they have your information, a return would have already been filed. Because of this, the IRS is taking longer to issue refunds. Be sure that you do not leave returns in plain sight in your car while at work. Be careful of any notes or forms that you throw out in the garbage. They should be shredded before being disposed of. If you have your return filed on your computer, be sure that it is password protected and be very careful of who has access to it.
Do not leave your completed return in the mailbox at the end of your driveway all day. Take it directly to the post office. Some taxpayers like to use certified mail in sending in their return. Write the full name Internal Revenue Service on your check instead of IRS. This makes it harder to change. Do not file your return on a public computer such as a library.
Now for some good news. The IRS is looking for more than 984,000 taxpayers who are owed money from the government. There is $917 million dollars waiting for a home. Another is people whose income was low and they did not file a return because they would not have owed taxes.
They may have had deductions taken out that now could be refunded to them. Under IRS rules, you only have three years to apply for this money. That means if it were from tax year 2009, you only have until April 15. There is no penalty or interest to file those old returns and get your refund.
Gary Boatman is a certified financial planner and local businessman who serves as president of the Monessen Chamber of Commerce.