For Procrastinating Taxpayers, There’S Still Time, Hope CCH Offers Tips On Overlooked Savings, Audit Avoidance

(RIVERWOODS, ILL., April 1, 1999) – With only two weeks until the April 15 tax filing deadline, it’s normal for some procrastinating taxpayers to get a little frazzled. Some become downright fearful thinking about the paperwork of filing, cash needed to pay their tax bill or the unpleasant possibility of an IRS audit. Here are some last-minute tips from CCH INCORPORATED (CCH), a leading provider of tax and business information.

Stay Up-To-Date To Save

It’s too late now for sophisticated tax planning, but it’s not too late to claim what’s coming to you. Each year brings some change in the tax law that can save some taxpayers money, and individual circumstances can change, making someone eligible to itemize or to claim deductions for the first time. 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 savings.
If you’ve been paying interest on a student loan, for the first time on the 1998 tax return, 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 you’re self-employed, tax law changes in recent years have made you eligible for "above the line" deductions – for one-half of your self-employment tax and 45 percent of your health care premiums. That health care premium deduction increases to 60 percent in 1999.

Don’t Invite Undue Attention, Delay Your Refund

Some of the items that "red flag" your return and slow down your refund are the easiest to avoid.

Include all Social Security numbers -- for yourself, spouse and any dependents. Don’t 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 don’t match, your return could be flagged for an audit. If you think there has been an error on a form, use the number you know to be correct and attach a short note to the return explaining the discrepancy. Then, ask the issuer of the form to file a corrected form with the IRS.
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 at many banks, libraries, Post Offices, and, of course, IRS offices. Or, try the IRS fax on demand system at 703-368-9694 and Internet site (http://www.irs.ustreas.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. Typical examples are unusually high deductions for medical or business expenses.
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 haven’t been conscientious about saving paperwork, you might contact suppliers for duplicate statements to verify payment of expenses.
Double-check your math. Addition and subtraction errors are common, and though the IRS will correct the errors, it will slow down your return – and your refund.
Sign It. Make sure you’ve signed your return. And, if you’ve had your return prepared by a tax professional, make sure you both have signed the form.

If You Need More Time

If you can pay your anticipated tax bill (or already have through payroll deductions), but you need more time to complete your return, you can request an automatic four-month extension. But, you still must file for the extension (Form 4868) by April 15.

Remember, 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 15 on any additional tax due.

If You Can’t Pay

Do file, but don’t bother asking for an extension if the real problem is that you don’t have the funds to pay the taxes you owe. Instead, CCH suggests you consider one of three courses:

Let the IRS bill you. The IRS charges fairly reasonable interest, and even with the penalty for underpayment you may find the terms attractive.
Request an installment payment schedule. File Form 9465, showing how much you’d like to pay on a monthly basis. Be aware that you will be charged a $43 fee if your request is approved. Also, 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 future liabilities.
Use plastic. If you’d rather not have Uncle Sam as a creditor, you can charge your tax bill to MasterCard, NOVUS/Discover or American Express – but you’ll be charged a "convenience fee" by the vendor (and interest).

Deadline Day

If you know you’re going to be down to the very last minute on filing, consider:

Many Post Office locations accommodate last minute filers by staying open late on April 15. Check with your local branch and find out how late you can mail your return and still ensure an April 15 postmark.
Taxpayers now may use express delivery services to send their tax return to the IRS, including various services offered by Airborne, DHL, Federal Express and United Parcel Service.
If you are filing electronically from your home computer or plan to use the Telefile system, you should assume thousands of other taxpayers will be trying to do the same thing – and at the same time. Anticipate that phone lines could be very busy. And you may send your return electronically at the last minute, but it isn’t considered filed until it is "postmarked" with the date and time by the electronic return transmitter.

What Are Your Chances?

What are the chances that the IRS will want to have a chat with you about your 1998 return? Based on latest available (1997) IRS data, 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.

Audits were especially low – less than .8 percent – for taxpayers with incomes between $25,000 and $100,000.
Below $25,000 the chances of audit increased, to 1.21 percent for non-1040A filers and 1.44 percent for 1040A filers – in part because of misuse of the earned income credit and because that’s where the IRS classifies non-filers.
Above $100,000, chances also increased, but only to 2.27 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 4.13 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, human resources, health care and small business markets. CCH is a wholly owned subsidiary of Wolters Kluwer U.S. The CCH web site can be accessed at www.cch.com.

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