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CCH Offers Last-minute Tax Filing Tips
(RIVERWOODS, ILL., March 29, 2001) Knuckles whiten and stomachs churn as the
mid-April tax deadline approaches. Fears of paying too much or not being able to
pay at all build as taxpayers crunch and recrunch their returns. And always,
hovering in the background is fear of the fabled IRS audit. To help taxpayers cope with
last-minute fears and uncertainties, here are some last-minute tips from CCH INCORPORATED
(CCH), a leading provider of tax and business law information and software, on how to cope
as the clock ticks towards midnight, April 16.
Stay Up-To-Date-To Save
"With a little more than two weeks to go until tax time, it may be too late to do
any sophisticated tax planning, but its not too late to claim whats coming to
you," says CCH Principal Tax Analyst Mark Luscombe, JD, CPA. "It seems that each
year brings change in the tax law that can save some taxpayer money, and individual
circumstances can also change, making someone eligible to itemize or to claim deductions
only available to the self-employed."
Here are some simple things to review:
- If buying a house has changed you from a "standard deduction" filer to an
itemizer, review expenses like charitable contributions that may now reduce your tax
bill. You may never have paid attention to them before, but now they can produce real
- If youve sold a house you probably have tax-free income. In most cases,
single filers can simply exclude up to $250,000 in gains from the sale of a personal
residence, and those filing jointly can exclude up to $500,000. Theres no
requirement to "roll over" the proceeds into the purchase of a new home, and
there are no age limitations. Its been the law since 1997, but many home sellers are
still concerned that they owe tax on their gains.
- If youve been paying interest on a student loan you may be eligible for a
valuable "above the line" deduction a deduction that reduces your
adjusted gross income. Check out IRS publication 970, "Tax Benefits for Higher
Education," for details.
- If youre self-employed, tax law changes in recent years have made you also
eligible for "above the line" deductions for one-half your
self-employment tax and 60 percent of your health care premiums.
Dont Invite Undue Attention
To keep a low profile as your forms are being processed and breathe easier as the IRS
sends your refund or deposits your check, CCH suggests you make sure to cover the
- Include all Social Security numbers - for yourself, spouse
and any dependents. Dont overlook a spouse receiving alimony or a child
receiving child support payments.
- Accurately report, or explain, all statements (W-2 forms, 1099 forms, etc.) to the IRS.
If the numbers dont match, your return could be flagged for an audit.
- Include all of the necessary forms with your return. That includes W-2s and all the
extra tax forms and schedules required by your return. Forms are available in many
locations including banks, libraries and IRS offices. Forms also are available from the
IRS through fax on demand at 703-368-9694. On the Internet, you can get forms and
explanations from the Services web site at http://www.irs.gov.
- If you know something looks suspicious, explain it up front. A short
explanation or informal schedule attached to the return and keyed to the line on the form
can avoid audits.
- Substantiate before you file. Knowing that you can document your deductions
will let you sleep easier. If this is your first time around claiming business expenses,
for example, and you havent been conscientious about saving paperwork, you might
contact suppliers for duplicate statements to verify payment of expenses.
If You Need More Time
If you can pay your likely tax bill but you need more time to complete your return,
you can file Form 4868 by April 16 to get an automatic four-month extension. This will
give you until August 15 to fill out all your forms, but you have to pay at least 90
percent of your eventual tax bill when you file for the extension, and you will owe
interest from April 16 on any additional tax due.
If You Cant Pay
Do file, but dont bother asking for an extension if the real problem is that you
dont have the funds to pay the taxes you owe. Instead, you can consider one of three
- Let the IRS bill you. The IRS charges fairly reasonable interest and even with
the penalty underpayment you may find the terms attractive.
- Request an installment payment schedule. File Form 9465, showing how much
youd like to pay on a monthly basis. Be aware, though, that you will be charged a
$43 fee if your request is approved and you have to be on the straight and narrow with the
IRS until the debt is paid, through proper withholding and estimated tax payments on your
- Use plastic. If youd rather not have Uncle Sam as a creditor, you can
charge your tax bill to Master Card, NOVUS/Discover or American Express. Youll owe a
fee in addition to the taxes and any balance will probably incur significant interest
charges. But, you may earn frequent flier miles, points, rewards or money back from
If your taxes have piled up to the point that you see no way of paying all of them, you
can ask the Service to agree to forgive part of the debt. This is known as an
offer-in-compromise. Its up to you to show that accepting your offer of partial
payment would be in the Services interest. The IRS is supposed to lighten up on the
offer-in-compromise procedure, as required by recent tax legislation, but many experts
think that you should use a professional to prepare the offer if at all possible.
Whatever you do, dont fail to file, CCH says. That just compounds your existing
tax problems with a non-filing penalty.
What Are Your Chances?
What are the chances that the IRS will want to have a chat with you about your 2000
return? Based on 1998 figures, the latest available, CCH says your chances of being
audited are low if your income is exclusively from wages, interest and capital gains
already reported on information returns like W-2s and 1099s.
- Only 0.58 percent of returns showing income of $25,000 to under $50,000 and only 0.62
percent of returns in the $50,000 to under $100,000 range received extra IRS scrutiny.
- Below $25,000, the chances of audit increased to 0.81 percent for typical 1040A filers
but the extra attention is mainly due to people cheating on the earned income
credit and because this income range is where the IRS classifies non-filers.
- Above $100,000, chances also increased, but only to 1.66 percent.
- You were most likely to be audited as an individual if you had a small business with
gross receipts of more than $100,000 reported on your Schedule C but still, only
3.25 percent of such business owners were asked to explain items on their returns.
About CCH INCORPORATED
CCH INCORPORATED, headquartered in Riverwoods, Ill., was founded in 1913 and has
served four generations of business professionals and their clients. The company produces
more than 700 electronic and print products for the tax, legal, securities, insurance,
human resources, health care and small business markets. CCH is a wholly owned subsidiary
of Wolters Kluwer North America. The CCH web site can be accessed at www.cch.com. The CCH Federal and State Tax
group web site can be accessed at http://tax.cchgroup.com.
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