It's That Time of Year Again

The clock is ticking down to the April 17th tax-filing deadline. Here are a dozen last minute tips if you still haven't filed:

1.

Verify to Avoid Trouble With the IRS. It's wise to check certain facts and figures after having your return professionally prepared. Before sending your return, ensure the names and Social Security Numbers (SSN)

Not All Income is Taxable on Your Return     When filing your tax return, you may be pleased to find that not all income is taxable. Certain types of income are partially taxed or not taxed at all.     Here are just some nontaxable items: qualifying adoption expense reimbursements; child support payments; gifts, bequests and inheritances; Workers' Compensation benefits; compensatory damages awarded for physical injury or physical sickness; cash rebates from a dealer or manufacturer and tax exempt interest from municipal bonds and tax exempt bond mutual funds (although this interest is not taxable it must be reported on your return).     Other items may or may not be included in income. For example, if you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the policy. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price.

listed are correct. Sometimes, two numbers become transposed or other mistakes happen. Clearing them up with the IRS after filing can be a hassle.

The IRS publishes an annual list of the top errors made on returns. Many involve names and SSN that are invalid or do not match federal records. If there is faulty information, the IRS may disallow your exemptions or other tax breaks, and may recalculate your taxes using a different filing status.

2.

Keep in Mind that Tax is a Match Game. The IRS electronically matches the information you report on your tax return with what is reported by others, on documents such as W-2s and 1099s. If there are discrepancies, your return may be flagged for closer IRS scrutiny. Tell your tax adviser about all income even if you didn't receive a form, including small amounts of bank interest income.

If you receive an incorrect 1099 or W-2, a corrected copy should be issued. Ask your tax adviser how to proceed.

3.

Don't Forget to Sign and Date the Return. If filing a joint tax return, make sure your spouse signs and dates the return too.

4.

Split a Directly Deposited Refund in Up to Three Accounts. Beginning this year, there are more options for receiving your directly deposited federal tax refund.

You can request to have it deposited in one, two, or three different U.S. financial institutions, such as banks, credit unions, mutual funds, and brokerage firms. There is no requirement to divide the deposits equally.

5.

Remember the Rules for Donating Used Clothing and Other Items Have Changed. If your 2006 tax return includes a charitable deduction for the donation of used clothing and household items, such as furniture, be aware that the rules have changed. Generally, the value attributable to such donations is the fair market value, but used items donated on or after 8/17/06 can only be claimed if they are in "good condition or better."

6.

Get Extra Credit This Year for Amounts Paid on Past Phone Bills. If you, your business, or your tax-exempt organization paid long-distance phone bills in March 2003 through July 2006, you may qualify for a one-time refund of federal excise tax on your 2006 tax return. Individuals can claim a claim refund of $30 to $60, depending on how many exemptions are on a return. If you have good phone records for the months in question, you also have the option of claiming the actual amount of tax paid.

Businesses and tax-exempt organizations can also claim the actual amounts paid. What types of service are eligible? Land lines qualify for the federal telephone excise tax refund, as well as most cell phone, fax and Internet phone service.

7.

Check on Your Refund. After filing, you can't speed up your refund, but you can find out about its status. Click here to use the IRS Where's My Refund? tool or call the toll-free Tele-Tax number (1-800-829-4477) to find out the status of your refund.

You need: Your Social Security Number or Tax ID Number, filing status and the refund amount

Depending on whether the return was original or amended, and whether you filed on paper or electronically, you will likely get one of several responses:

• An acknowledgment that your return was received and is in process.
• The mailing or deposit date of your refund.
• Notice of a problem, such as an undeliverable refund due to an incorrect address.

8.

Need More Time? Get an Extension. Sometimes it's just not possible to gather your tax information and file by the due date. The IRS allows taxpayers to request an automatic six-month extension of the due date, by filling out Form 4868. Click here for the form in a PDF document.

An extension gives you until October 15th and allows you to avoid incurring "failure to file" penalties. However, it only provides extra time to file, not to pay. Whatever tax you estimate is owed must still be sent by the April 17 due date of the return, or you will incur penalties.

9.

If you owe, enclose Form 1040-V, Payment Voucher. And make the check or money order made payable to the "United States Treasury." (You can also choose to pay by credit card by contacting one of the service providers.)

10.

Contribute to an IRA or SEP. There's still time to reduce your tax liability by contributing to a traditional IRA or a SEP if you meet the qualifications. (You can also still open and fund a Roth IRA, although Roth IRAs have no effect on your present tax situation.) Click here for the details from our previous article.

11.

Fix an Error After Filing. What happens if you file your return and then find you overlooked something important? Depending on the error, you may need to amend your return. If the amendment involves an error in your favor, you may be eligible for a refund. Keep in mind that there are statute of limitation deadlines for amended returns. Ask your tax adviser for more information.

12.

Be Aware of Another Deadline. April 17 is not only the deadline for your 2006 tax return, it's also the deadline for the first quarterly estimated tax payment for 2007, if you are required to make one. (The due date for the second 2007 installment is June 15th.)

If you don't pay enough estimated tax during the year, you may be liable for a tax penalty on top of the tax that is ultimately due.

Fortunately, the tax law provides several "safe harbors" for avoiding an estimated tax penalty. No penalty is imposed if your annual payments equal at least:

• 90 percent of the current year's tax liability or
• 100 percent of the prior year's tax liability (110 percent if your adjusted gross income for the prior year was over $150,000).

The penalty may also be avoided if you pay installments on an "annualized basis." Ask your tax adviser for more information.

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