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Janice France-Pettit: Make the inevitable less painful with preparation

Union Bank

Posted: April 9, 2011 1:55 a.m.
Updated: April 9, 2011 1:55 a.m.
 

Ben Franklin once said, “In this world, nothing is certain but death and taxes.”  For some, tax season is one of the most distressing times of the year — with anxiety over searching for documents, worrying about what you might owe and the fear of an audit starting long before the filing deadline. 

Filing taxes may be inevitable, but the following tips can help make preparing your 2010 taxes a little easier:

Get organized
Gather all the documents you’ll need to file your taxes: W-2, 1099s and other forms, receipts, canceled checks and other documents that support income or deductions you’re claiming on your return. 

Starting this year the IRS will no longer be mailing paper tax packages. If you are not going to file your taxes electronically and need paper forms, you can find them online, at local IRS offices, your local library or post office.

Consider filing electronically
Whether you use a purchased software program or you qualify to utilize free tax software offered by the IRS or California Franchise Tax Board, filing electronically is simple, safe and secure.

Electronic filing can help reduce mistakes, as a computer checks for mathematical errors and, if you are expecting a return, filing electronically will help speed your refund, especially if you choose direct deposit. 

Do your homework
Hundreds of changes are made to federal tax laws every year. Dedicating some time to learning about major changes may help save you money and time.

Check with your financial advisor or you can find current information and changes in the law on the Web at the IRS (www.irs.gov) and California Franchise Tax Board (www.ftb.ca.gov) Web sites.

Get help if you need it
When you have a very complex tax return, hiring a professional may be a wise choice. A certified public accountant or licensed tax consultant may cost you a few hundred dollars but they might find extra tax deductions or credits that could save a substantial amount of money on your taxes.

If you earned less than $49,000, you can get free face-to-face help on your tax return at IRS offices or from Volunteer Income Tax Assistance (VITA) programs, and if you’re over 60, you can get help from the Tax Counseling for the Elderly program run by AARP.

File on time
The IRS has approved April 18, 2011 as the tax filing deadline for 2010 tax returns and extension requests (since Emancipation Day, a holiday observed in the District of Columbia, falls on Friday, April 15, the usual tax deadline).

State taxes, however, are still due on April 15. Be sure to file and pay on time or expect to pay late fees and interest. If you can’t file by the deadline, file an extension and pay as much of your taxes as possible at that time to minimize interest and penalties.

Keep your taxes on file
Federal law requires that you keep the records that substantiate your income and deductions in the event you are audited, so it is wise to file your tax returns and keep copies of cancelled checks that prove that you paid your taxes on time. 

The IRS has up to three years from your filing date to audit your return if it suspects good-faith errors, and you have up to three years if you decide to file an amended return to claim a refund.  

If the IRS suspects that you underreported your gross income by 25 percent or more, they have up to six years to challenge your return. There is no time limit if you failed to file your return or filed a fraudulent return. 

The foregoing article is intended to provide general information about tax preparation and is not considered financial advice from Union Bank.  Please consult your financial or tax advisor.

Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, Santa Clarita Valley, San Fernando Valley and Antelope Valley region. The foregoing article is general information about financial literacy and is not considered financial or tax advice from Union Bank.  Please consult your financial or tax advisor. Her column represents her own views, and not necessarily those of The Signal. Visit www.unionbank.com for more information.

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