Filing Deadlines

The filing deadlines are as follows:

• January 15, 2009 – Pay the remaining balance of your 2008 estimated tax. This date requirement does not apply if you file your 2009 tax return and pay any tax due in full by 2/2/2009.
• January 31, 2009 – Make sure you have received your income verification statements. This includes your W-2 from each employer you worked for in 2008 and any 1099’s you should have received. If you have not received one of these forms yet, contact the person who paid you to find out when you can expect it or how you can get a copy. Remember, you are still responsible for reporting income even if the person who paid you does not fulfill his or her own responsibilities.
• April 15, 2009 – File your 2008 tax return and pay the balance, if any, of your tax liability. Also, pay the first installment of your 2009 estimated tax by this date. (Do not file your 2008 return and payment with your 2009 estimated payment. These two must be mailed separately.) If you cannot meet the filing deadline, you may file Form 4868 for a 6 month extension (either on paper or electronically), and include a payment for the estimated amount of taxes you owe. If you do not pay enough in estimated tax at this time, you will be charged penalties and interest even if you file the extension on time. If you cannot pay the full tax liability due at this time, you may file Form 9465 to request an installment payment arrangement.
• June 15, 2009 – Pay the second installment of your estimated tax payments. You may amend your estimate at this time if your circumstances have changed. If on April 15th you were a U.S. citizen or resident living and working abroad, or in the military outside the U.S. or Puerto Rico, you are automatically granted a two-month extension and have until this date to file your 2008 tax return and pay the balance due. You may obtain an additional four-month extension by filing Form 4868.
• September 15, 2009 – Pay the third installment of your estimated tax payments. You may amend your estimate at this time if your circumstances have changed.
• October 15, 2009 – File your 2008 tax return if you received an automatic six-month (or four-month) extension using Form 4868 and pay any additional taxes due. Be sure to apply the payment you sent with your extension request to your return.
• December 31, 2009 – If self-employed, this is the last day to set up a Keogh plan for 2009.
• January 15, 2010 – Pay the remaining balance of your estimated tax for 2009. This date requirement does not apply if you file your 2009 tax return and pay any tax due in full by 2/1/2010.

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Choosing the Correct Tax Form

Form 1040EZ is for single, or married filing jointly with taxable incomes less than $100,000. Also, under age 65 and not blind as of January 1, 2007 can file a 1040EZ. 1040EZ includes only wages, interest received (up to $1,500), unemployment compensation, and earned income credit (does not apply if you received any advanced earned income credit payments.)

TaxBrain automatically determines the most affordable form the taxpayer may use, while optimizing the minimization of tax liability at the same time.

Form 1040EZ is for single individuals or married couples filing jointly with taxable incomes less than $100,000. You must also be under age 65 and not blind as of January 1, 2008. This form is used to report only wages, interest received (up to $1,500), unemployment compensation, and earned income credit, if applicable (Please not that the earned income credit may not be available if you received advanced earned income credit payments.)

Form 1040A is the next simplest tax form. This form is generally for taxpayers who make less than $100,000 in taxable income and take the standard deduction. This form includes most types of income, a few deductions, and several credits.

Form 1040 includes all income, deductions, and credits available to taxpayers. While anyone can file with Form 1040, the following people must file with Form 1040:

• Individuals receiving self-employment income, partnership or shareholder income, beneficiary income, employer-provided adoption benefits, dividends on an insurance policy if they exceed the total of premiums paid, alimony, state tax refunds, rents and royalties, tips not reported to an employer, or gains and losses from property sales;
• Individuals who had paid alimony, moving expenses, self-employed health insurance premiums, self-employment tax, penalty for early savings withdrawal, alternative minimum tax, IRA penalty tax, household employee tax, or “kiddie” tax; or
• Individuals who have made a contribution to a retirement plan

Also, individuals who would like to take the health coverage tax credit, adoption credit, or the first-time homebuyer credit must file Form 1040.

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Estimated Tax Payments

Estimated tax payments can be a very helpful tool to aid in your tax planning. By paying taxes quarterly, you can avoid a surprise lump sum due upon filing your year-end return. Not only are they helpful for planning, you may face a penalty if you are required to pay them and fail to do so.

You are generally required to make estimated tax payments if you expect to owe at least $1000 in taxes for 2009 over and above your withholding and credits, and you expect your withholding and credits to be less than the smaller of either the following: 90% of the tax shown on your 2009 tax return or 100% of the tax shown on your 2008 tax return. For taxpayers with income over $150,000 ($75,000 if married filing separately) in 2008, the taxpayer must substitute 110% for 100% above.

How do you calculate them? Use the 2009 Estimated Tax Worksheet found on the 2009 Form 1040-ES. This is also where you will find your payment stubs in case you are mailing in your payments. Payments can also be made via EFTPS (Electronic Federal Tax Payment System).

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Filing for an Extension

Form 4868 (Application for Automatic Extension of Time) is used to apply for an extension of time for filing your U.S. individual tax return. You must apply by the due date of your tax return to receive the automatic six-month extension. It is important to note that even though you are applying for an extension to file your tax return, there is no extension to pay your taxes. However, if you make a good faith estimate of your tax liability and submit a payment for that amount with Form 4868, no penalty will apply. There may be a penalty if a good faith estimate is not given. Here are some tips to remember when filing an extension:

1. You may get an extension by phone or online at www.IRS.gov and use a credit card to make a tax payment. Form 4868 does not need to be filed if a credit card is used for payment. There is a transaction fee, however, imposed by the service provider of the credit card transaction. Phone numbers and service provider websites are located on Form 4868.
2. The IRS may terminate the extension by mailing a 10-day notice to you under certain circumstances. If you cannot pay your taxes when the six-month extension is due, you can request an installment agreement by using Form 9465.
3. Remember that interest is due on unpaid taxes, even if you applied for an extension and made an estimated good faith tax payment.

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When you have to file and when you should file

You are required to file a tax return when certain situations and/or income tests are met, and if you are a citizen or resident of the United States or Puerto Rico. They are described as follows:

• You received any EIC payments in advance from your employer,
• You are self-employed and owe self-employment tax of $400 or more ,
• You owe any alternative minimum tax, IRA penalty, or FICA on tips,
• You are a nonresident alien with a U.S. business,
• You are a nonresident alien and have tax liability not covered by withholding,
• You are a dependent and meet the dependent’s filing income test found on the IRS website, or
• You are a resident or citizen that has income greater than the standard deduction based on your filing status.

You may not be required to file a tax return under the following circumstances, but you will not receive a refund or credit due unless you file a return:

• You are entitled to a refund of taxes withheld, or
• You are entitled to a refund based on the Earned Income Credit for working families.

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Paying Taxes

The IRS offers taxpayers several choices for paying their tax liability, including payment by check, money order, credit card, or direct debit, through the mail, by phone, online, or in person. However, do not send cash.

• When paying by check or money order through the mail, make the check payable to “United States Treasury.” Write your social security number, tax year, and form number (example: 2008 Form 1040) in the memo section. Mail a 1040-V payment voucher with the check or money order and the tax return at the same time.
• Direct debit can be used if you electronically file your return. Be sure to enter the correct bank routing and account information when you process the return.
• When paying by credit card, the service provider for the credit card transaction will impose a transaction fee based on your payment amount.

The Electronic Filing Tax Payment System (EFTPS) is a free program provided by the IRS which allows taxpayers to pay their taxes either online or by phone. Payments can be scheduled in advance 24/7 for direct debit from the taxpayer’s designated account on the day of the taxpayer’s choice. To sign up, visit IRS.gov. Note: You cannot sign up and use the system immediately. Allow 60 days for activation of enrollment.

If you cannot afford to pay the full amount of your taxes when due, you can request an installment agreement for payment with the IRS by filing Form 9465 or by applying online. A processing fee ranging from $43 to $105 will apply if your agreement is accepted. The IRS normally decides within 30 days whether to accept your proposed agreement. However, if you send your return and request after March 31st, the IRS may take longer due to the high number of requests they receive at that time.

Under certain circumstances, the IRS is required to accept your agreement. If you owe less than $10,000, you have filed returns and paid taxes in all of the five previous five years in a timely manner , you show that full payment cannot be made at the current time, and you request an installment plan for three years or less, your agreement will be automatically accepted.

Rather than entering into an installment agreement with the IRS, it is advisable to investigate other methods of payment such as a loan from some other source or a credit card. These methods of payment could be less costly to you. Also, if you are currently in bankruptcy, you must contact the IRS for further information as an installment plan is not available.

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Taxpayer Filing Status

Your filing status determines the tax rate that applies to your taxable income, along with the amounts and availability of some credits, deductions, and exclusions. The filing statuses are as follows: single, married filing jointly, married filing separately, head of household, and widow(er) with dependent child(ren).

It is possible that only one status will apply to you, or it may be possible that more than one status applies to you, in which case, you will want to use the status that provides the lowest tax liability (or highest credit in some cases). First, you must determine whether you are single or married. If you were single on the last day of the year, the status of single is always available to you. If you were married on the last day of the year, your two choices so far are married filing jointly and married filing separately. It does not matter if you are currently getting a divorce. You are considered married until a final legal decree is granted. Under most circumstances, you will yield a smaller tax liability (or bigger credit) if you file married filing jointly. If you lived apart from your spouse for the last six months of the tax year, you can file head of household if you meet the requirements. Otherwise, you must file under one of the two married statuses.

Generally, to qualify for head of household status, you must have provided more than 50% of the household costs for a dependent child or relative who lived with you; or, paid more than 50% of the costs for a dependent parent, whether or not they lived with you. The rules for filing Head of Household are quite specific, so be sure you are eligible before you make this choice. If you are using TaxBrain, click on the in the Filing Status worksheet for an easy explanation to determine whether you qualify. The Head of Household status is almost certain to yield you a higher credit than filing single or married so you want to take advantage of this option if you are eligible.

Generally, a qualifying widow(er) was widowed in 2006 or 2007 and paid more than 50% of the household costs for him or herself and a dependent child living with the widow(er). Again, the rules are very specific and you can use TaxBrain’s knowledge base for additional guidance as you prepare your tax return. If you became a widow(er) in 2008, you need to file married filing jointly for 2008, and the qualifying widow(er) with dependent child status may be available to you the following year. The tax rates for qualifying widow(er) status are more favorable than the rates for single status, and should be used if you qualify.

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