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Checklist for Tax Procrastinators as Deadline Looms

Finances: About 37 million last-minute filers are expected this year, and they make more careless and costly mistakes, experts say.

April 14, 2001|KATHY M. KRISTOF | TIMES STAFF WRITER

Haven't filed your tax return yet? You've got plenty of company.

Even with an extra day--the filing deadline is midnight April 16--about 37 million Americans are expected to participate in the crush of last-minute filing this year.

Either because of carelessness or confusion, last-minute filers account for a disproportionate number of costly and time-consuming mistakes, experts say.

"If you are doing your return this weekend, prepare it, put it aside for a while and then come back and double-check the numbers," suggested Don Roberts, spokesman for the Internal Revenue Service in Washington. "If you are in a rush at the end, you are more inclined to make an error."

What to Watch

Slightly more than 1% of all filers either forget a dependent's Social Security number, transcribe it incorrectly or use a dependent's nickname rather than a full legal name. Several money-saving deductions, including personal exemption credits, child tax credits and the earned income tax credit, hinge on valid dependent information. Messing this up can cause the deductions and credits you claimed based on that dependent to be disallowed, which can delay or reduce your refund.

Most other errors boil down to bad math or picking up a figure from the wrong line on a tax table, Roberts says.

About 750,000 taxpayers make mistakes each year when calculating the earned income tax credit, which is aimed at the working poor. And about 500,000 taxpayers make mistakes on the child tax credit.

Errors in refund and "tax due" amounts are also fairly common. Luckily, the repercussions from these errors are minor: The IRS sends a note with your refund saying why the check is for less (or more) than you specified. If you miscalculate how much you owe, the IRS will correct your math and send you a bill for the difference.

If you're getting a refund, also make sure that you sign your return. (If it's a joint return, both husband and wife must sign.) The IRS will not process refunds without a signed return. Instead, the agency will mail the 1040 back for a signature. Unsigned returns are less problematic when you have to pay, unless you also forget to sign or send your check, Roberts says.

Reminders

* If you plan to deduct individual retirement account contributions, make sure the deposit is in the account on or before the April 16 filing deadline. Also be sure to write on your check that the contribution is for the 2000 tax year. Otherwise, IRS rules require financial institutions to assume the contribution is being made for the current tax year, says Sean Jerding, retirement consultant for Fidelity Investments in Newport Beach.

* If you're self-employed, remember to deduct 60% of the health insurance costs you pay for yourself and your family. These deductions have been steadily rising. By 2003, you'll be able to deduct 100% of your family's health insurance costs.

* Stop-smoking programs and prescription drugs aimed at alleviating nicotine addiction now qualify for medical expense deductions, but only if your medical expenses exceed a set percentage of your adjusted gross income.

* Everybody knows that charitable contributions of both cash and property are deductible for those who itemize. However, if you use your vehicle for charity--perhaps delivering sandwiches for the homeless--you also can deduct 14 cents for each charitable mile you drive.

Where to Get Forms

The IRS offers individual tax forms on the Web at http://www.irs.gov. However, http://www.netlizard.com offers a "2000 Federal Income Tax Form" link that gets you to a nicely organized list of federal forms and documents that you can print out.

If you don't have Web access, most libraries and post offices stock commonly needed forms and schedules. The IRS also offers a fax-back service that can provide most forms. To get a form faxed, call (703) 368-9694 from the telephone connected to your fax machine.

If You Can't Pay

If a boost in income--or some financial setback--makes it impossible to pay all that you owe right away, don't panic, Roberts says. Those who owe less than $25,000 can set up an installment payment agreement, under which they pay the IRS over time. The only caveat: You must pay the whole bill within five years, and you will be charged interest (currently 8% a year) and late-payment penalties that amount to one-quarter of 1 percentage point per month.

Those penalties are paltry compared with the penalties for not filing at all. If you fail to file, you get slammed with a penalty of 5% per month of the tax due. That fee is capped at 25% of the tax due, with one exception. If your return is more than 60 days late, the minimum penalty is $100 or 100% of the balance due, whichever is less, Roberts says.

Delay

If you can't get your paperwork together by the deadline, you can procrastinate four more months by filing Form 4868, an application for an automatic extension of time to file.

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