BY PERRY BROTHERS
The Cincinnati Enquirer
Rushing to get your taxes done this week? The IRS has a message for you: relax.
If it looks impossible that you'll meet the deadline Wednesday, think about filing for an extension.
Most taxpayers are eligible for the four-month extension, and 400,000 taxpayers of the 16 million a year who file through the Covington IRS Service Center ask for one, according to Chris Kerns, spokesman for the Covington center.
Those who owe taxes be warned, however. Form 4868 "Application for Automatic Extension of Time to File U.S. Individual Income Tax Return" grants only an extension on the paperwork. Uncle Sam still wants your money by April 15.
If you haven't completed the paperwork by April 15, sending a payment equal to about 90 percent of last year's tax bill should protect you from a late-payment penalty.
If you opt to get your return completed and postmarked by midnight Wednesday, watch out for a few common errors that could lead to a red tape tangle after you file.
"Take your time and read the tax packet," Mr. Kerns said. "A very high percentage of the calls that the IRS gets this time of year are answered in the tax packet."
Double check the math. A typical paper return has an error rate of about 16 percent, primarily due to basic math errors.
To lessen the chance of math goofs, try the increasingly popular electronic filing methods -- available via computer software, on the internet and most accountants.
Electronic returns have a one percent error rate. Telefile -- the telephone filing available only to 1040EZ filers that received Telefile packets in the mail -- has an one-tenth of a percent error rate.
Incorrect or omitted Social Security numbers, especially those of dependent children, can cause a headache this year, too. The IRS used to contact taxpayers to correct a child's Social Security number. Now, it recalculates the tax without the deduction and requires the taxpayer to file an amended return.
Low-income filers, make sure you calculate your Earned Income Credit. Mr. Kerns said many taxpayers mess up on this calculation and either take it when they shouldn't or fail to take it when they should.
The Internal Revenue Service processing center in Covington is gearing up for the surge of last-minute returns.
(Michael E. Keating photo)
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If you correctly calculate your taxes and owe more than you can pay, you have some options.
Paying late can be expensive. Interest and penalty charges can run up to 14 percent a year. (Late payments are subject to an interest charge that currently runs eight percent a year. In addition, a late-payment penalty of 0.5 percent per month is assessed on unpaid balances if you don't pay at least 90 percent of your total tax by April 15.)
If you can't afford to pay your tax bill, at least file an extension request by the April 15 deadline. Although you'll be subject to interest charges and possible late-payment penalties, you'll be protected from late-filing penalties, which run a steep five-percent a month (up to a maximum 25 percent).
If you aren't able to scrape together the funds to pay your taxes by Aug. 17, you can negotiate a monthly payment plan with the IRS once you've finished your return. To apply, file Form 9465, "Installment Agreement Request," along with your completed return.
Paying on the installment plan is no free ride. Unpaid balances are subject to the usual interest and penalty charges for late payments. In addition, the IRS charges a $43 fee to enter into an installment agreement.
Delay without penalty
If all you need is an extra month or so to come up with the cash to pay your tax bill, there is a way you may be able to buy more time to pay up without being subject to interest or penalties.
All you need do is take the IRS up on its offer to calculate your tax bill for you.
If you're eligible for this IRS offer, and many individuals are, just fill out your tax return, stopping short of computing certain totals, and send it in by April 15. The IRS will compute your tax and send you a bill for any tax owed. As long as you pay within 30 days of the notice, you won't be assessed any penalties or interest. Among other eligibility requirements, your taxable income must be less than $100,000 and you can't itemize deductions. The complete list of eligibility requirements and which lines to fill out can be found in IRS Publication 967 "The IRS Will Figure Your Tax."
Gary Klott contributed to this report.
