Deadline Day: A Last-Minute Checklist

Also, what if you can't pay your taxes on time?
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The clock is ticking. You have less than 12 hours to get your tax return or extension in to avoid paying penalties. Remember, your return or extension just needs to be postmarked April 15. It does not need to be in the

Internal Revenue Service's

hands. Here are a few more last-minute pointers:

  • If you owe Uncle Sam money, make the check out to the United States Treasury, not the IRS. That's new for 1998. And double-check that your Social Security number is on your forms. If it's not, that could really hold up the processing of your return. For more new changes on your Form 1040 -- U.S. Individual Income Tax Return, see this previous story.
  • Need to know where to send your forms? If you're filing your return by mail, the Form 1040 instructions include all the addresses you'll need. If you're filing electronically, you still have to send in Form 8453-OL with your signature. The proper mailing address will be on the form.
  • Need a state tax form or address? Check www.taxsites.com.
  • Are you a U.S. citizen living abroad? You are automatically granted a two-month extension to file your tax return, says Mary Beth Pante, a senior tax manager in the international assignment solutions department at PricewaterhouseCoopers in Boston. But you must reside outside the U.S. That means Puerto Rico and Guam don't count. And for the creative folks out there, you can't get an extension just because you are traveling outside the U.S. If you live abroad, you don't have to file a thing until June 15, and technically you don't have to pay your tax bill until then, notes Nick Morrow, foreign tax specialist at Martin Geller, a New York accounting firm. The only catch is that if you owe money, the IRS will charge you interest from April 15 on. When you file your return, be sure to include a statement explaining why you qualify for this special extension.
  • A quick word to traders. So many of you have written in, detailing your current trading situation and asking whether you qualify for trader status. Unfortunately, the answer is on case-by-case basis. If you truly believe you are a trader and have all the documentation to support your position, you should consider filing as one. Only you know whether or not you are truly choosing this as your occupation or whether trading is just a hobby. Be truthful to yourself.
  • And last, but not least, if you're planning to file for an extension, you'll need to file Form 4868 -- Application for Automatic Extension of Time to File U.S. Income Tax Return. And again, this is not an extension of time to pay. So calculate that tax bill. Be sure to check your state's instructions, too. If you're putting your state return on extension as well, you may be able to just use your federal extension to file for an extension in your state. But some states require their own form.

Now on to a few more last-minute questions

I Can't Afford My Tax Bill

I'm in a quandary about filing, paying, etc. I plan to file my return on time but not pay the taxes owed until several weeks later, when the funds become available. My accountant felt this was the best strategy. I will also pay on time some portion of my estimated taxes due. Do you have any advice? -- John Golden

John,

Do whatever you can to get the return out and avoid paying late-filing penalties, says Maggie Doedtman, tax research and training specialist at

H&R Block

. So even if you don't have the money, send in your return anyway.

Late-filing penalties can be hefty. The IRS will charge 5% of your unpaid tax liability each month until your return is filed, says Rande Spiegelman, personal financial services manager at

KPMG

. But it gets worse. If you file your return more than 60 days late, the minimum penalty now becomes the smaller of $100 or 100% of the unpaid tax. So file something.

You aren't entirely escaping extra fees, though. By not including your tax payment due, you will be hit with a late-payment fee that runs from 0.5% to 25% per month on your unpaid tax bill.

But there are some alternatives. If you send your return in today without its payment, you probably won't get the bill from the IRS for about a month, notes Doedtman. (It takes the IRS some time to get organized and send out your first bill.) But that first bill will be just the final amount owed. The interest will not be added in yet, so you essentially have a 30-day grace period, says Doedtman.

For 1998, you can charge the balance due on your credit card. (See our

story on this new option.) Although there is a processing fee of 2.2% to 3% of your tax bill, this may a viable option if, again, you need only an additional 30 days to scrape up the money, says Christina Tomeo, a tax manager at PricewaterhouseCoopers in New York. Otherwise you'll owe those hefty interest charges on your credit card.

Of course, there is always the IRS' installment plan. If you know you're going to be unable to pay the amount due, you must file

Form 9465 --

Installment Agreement Request

with your return, says Spiegelman. The IRS will examine your situation and decide how much you should be paying. At that time, they'll charge you a $43 processing fee, and you'll pay approximately 8% interest on the unpaid balance.

If you're filing an extension, again, pay as much as you can, says Tomeo. The late-payment penalty won't apply during the extension period if you paid in at least 90% of your actual tax liability before the original due date of your return.

Are Taxes Deductible?

Can I deduct the amount of federal or state taxes I paid last year on my return for 1998? Also, if I received a New York state refund last year, must I report it as income this year? I did not itemize any deductions. -- Mercy Qasem

Mercy,

You cannot deduct the federal income tax you paid in 1998. And as long as you do not itemize your deductions on

Schedule A --

Itemized Deductions

, you will not able to deduct the state and local income taxes you paid in 1998 either.

If you did itemize in 1998, you would be able to get a deduction for the state and local income taxes withheld from your salary in the year they were withheld. So any 1998 state and local withholdings could be reported on Schedule A of your 1998 tax return. You'll find these taxes withheld in boxes 18 and 20 of your

Form W-2 .

You may also deduct state or local income taxes withheld on

Form W2-G --

Certain Gambling Winnings

(box 14),

Form 1099-MISC --

Miscellaneous Income

(box 11) or

Form 1099R --

Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc

(boxes 10 and 13), notes the

Ernst & Young Tax Guide

.

As far as your state tax refund, if you didn't itemize your deductions in

1997

, you don't have to worry about the refund in 1998.

If you did itemize in 1997, you must include all or part of the state tax refund you received in 1998 on line 10 of Form 1040. There's a worksheet on page 21 of the Form 1040 instructions that will help you determine the exact amount you must include in line 10.

TSC Tax Forum aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All readers are urged to consult with an accountant as needed about their individual circumstances.