If you’re having trouble getting your information together for the filing of your 2000 income taxes, you can get an extension to file. If your tax return is not going to be done by April 16, you may choose to file an “Application for Automatic Extension of Time,” Form 4868. An extension means that you are extending the filing of your income tax return until Aug. 15, 2001. By filing the extension application, you will eliminate a late filing penalty. However, it is not an extension of time to pay any taxes due. Therefore, if you think you are going to owe money on your 2000 return, it is a good idea to get it paid by April 16, 2001, so you can eliminate a late payment penalty. Your tax preparer can help you estimate the amount of tax due, even if there is not enough time to get your return done. If you’re in a refund situation and you file an extension, there will not be any underpayment penalties.
April 16 is also the due date of your first estimated tax payment for 2001 taxes. By paying your estimated taxes on time and for the correct amount, you can avoid needless penalties. The other due dates for estimated taxes are June 15, 2001, Sept. 15, 2001, and Jan. 15, 2002.
If you are filing your income tax return on time, but owe less than $10,000 and cannot pay the amount in full, you can file Form 9465, “Installment Agreement Request” with your tax return in order to set up a payment plan.
New Social Security figures
Those under age 65 who are collecting Social Security benefits and continuing to work can earn up to $10,680 in 2001 without any loss of benefits (up from $10,080 in 2000).
Married name must match Social Security number
The IRS disallows personal exemptions and other tax benefits claimed for any person whose name does not match his/her Social Security number on a tax return. Women who changed their names when they married face the loss of their exemptions. They should get an updated Social Security card from the Social Security Administration by filing Form SS-5.
April 16, 2001, is the last day to make your IRA contributions for the tax year 2000. Extensions do not change this fact. This applies to regular and Roth IRAs.
Failure to use the most advantageous filing status is a common mistake
Hire your children
If you are self-employed and your children are under age 18, hire them. You can pay them up to $4,400, deduct it from your business, and the children will not pay income tax on it.
Although you must file a W-2 for them, no Social Security or Medicare taxes are required on them. If they make a deductible IRA contribution, they can earn up to $6,400 without paying income taxes.
Common tax return mistakes
Failure to use the most advantageous filing status is a common mistake. Taxpayers who qualify to file as a tax-favored “head of household” often fail to do so.
When you’re first widowed, failing to use joint return tax rates is another common mistake. “Qualifying widow(er)” is another tax-favored filing category that people often overlook. If your spouse died in either of the two prior years and you support a dependent child, then you can use the tax rates and standard deduction amount for “married filing jointly,” which is a better filing status than “head of household.”
Another costly mistake is deducting contributions to Roth IRAs. They are not deductible.
Failure to provide the identification number of the individual or organization providing childcare can nullify any childcare credits you may have coming. n
This article has been presented by PBS Tax & Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for more than a quarter century. Contributions to this article were made by Shasta May, Director of Business Development for PBS. If you would like further information, please contact us at 800-697-5153. Visit our web site at www.pbstax.com.
Everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.