Well it’s tax time, and it is a big deal for most people. Typically, taxes are our single largest expenses during our lifetimes. We’re taxed when we earn, taxed when we spend, taxed when we save, taxed when we invest, and taxed when we die. Whilst the April 15th deadline may only be stressful if you owe Uncle Sam money, you still need to file if you want a refund. Remember, a refund means you gave the government an interest-free loan and had to operate on less income during the process. Yuck! The refund merely represents the IRS returning to you what was already yours. Refunds have been averaging about $3000 this tax filing season, up by about 10%. Typically, I do have to pay additional taxes every April, but for the first time, I actually put taxes in my budget rather than just taking it out of a general savings account. Thus, I had already psychologically separated my tax-fund money from the rest of my funds. Moreover, we overestimated our tax burden for 2009, so we get to invest the remaining money in our tax fund.
Some Important Tax Tips
If your tax return is relatively simple, consider going with an online service, such as TurboTax. Additionally, if your income is less than $57,000 (i.e. 70% of filers), you qualify for the government free tax filing and preparation software at www.irs.gov/freefile. If you owe and have a more complicated return or are still planning on taking advantage of the first-time home buyers credit AND have not filed yet, you will likely need to file for an extension. You would file a form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.” You can request the extension online, by phone or by mail.
Of course, all of this may be mute if you are due a refund. If you don’t owe additional taxes, you can probably ignore the April 15 deadline. Since the penalty for missing the deadline is a percentage of taxes owed on the late return, if you owe nothing, there is no penalty. You have up to 3 years from the due date to claim a refund. The IRS claims it has about $1.3 billion in unclaimed funds from the 1.4 million people who didn’t file refunds in 2006.
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