5 Things to Accomplish Before April's Tax Deadline
By Jeffery Levine, IRA Technical Expert
Follow Me on Twitter: @IRAGuru4EdSlott
Thanks to April 15th falling on a Sunday and a Washington D.C. holiday (Emancipation Day) on the following day, the April 15th filing deadline is pushed back to April 17, 2012 for 2011 federal income tax returns. Below are five things you should address between now and then.
#1 - Make your 2011 IRA or Roth IRA contribution
If you haven't yet made a full 2011 IRA and/or Roth IRA contribution, you can still do so up to the April 17th filing deadline. The 2011 IRA/Roth IRA contribution limit was $5,000 ($6,000 if you were 50 or older by the end of the year). If you’re making your 2011 IRA contribution in 2012, make sure you notify your custodian and that they correctly code it as a 2011 contribution so that if you decide to make a 2012 contribution at a later time, you won’t run into any problems. Getting a contribution in so late isn’t preferable, but it’s definitely better than not making one at all.
#2 - File your 2011 tax return or an extension
No surprise here – you must file by April 17th or face failure to file penalties (find out in this article if you have to file a tax return). What you file though, is up to you and depends on your situation. If you have all your 2011 tax information, you’re probably best off filing your actual 2011 tax return. If you don’t have all your information – say, for instance a K-1 has yet to arrive or if you plan on recharacterizing a 2011 Roth conversion - you may want to file an extension. The extension is automatic as long as you file Form 4868 by the April 17th deadline. If you file an extension, you generally have until October 15th to file your return.
#3 - Pay your 2011 tax liability
Whether you file a return or an extension by April 17th, you must pay your 2011 tax liability by April 17th. An extension only gives you a longer time to file, not to pay your taxes. How do you know how much to pay if you haven’t completed your actual return yet? Simple… estimate. You may want to add a little cushion to your estimate, just in case you’re wrong. It will help you avoid underpayment penalties and you’ll get a refund of any overpaid amounts when you file your return, plus interest.
#4 - Make your 2012 first quarter estimated tax payment
For those of you who are required to make quarterly estimated tax payments, April 17th is a double-whammy. Not only do you have to pay up for any balance owed on your 2011 tax liability, but your first quarter payment for 2012 must be made at the same time. This year, some of you might be first time estimated tax payers thanks to 2010 Roth conversions that were spread over two years. The first part of that income is included in your 2011 income, which serves as the basis for determining 2012 “protective” estimated tax payments.
#5 - Start planning for next year
As many of you may be aware, if Congress takes no action before the end of the year, federal income tax rates are scheduled to revert to their pre-Bush tax-cut levels. There are a number of strategies that could help take advantage of this situation, should it come to pass, so be sure to discuss planning strategies with your tax and/or financial advisor.