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Temecula Financial Planner, John Dubots, with Six Last-Minute Tax Tips
John Dubots, of Dubots Capital Management, shares helpful tips for last-minute federal income tax filing.
By: Dubots Capital Management
Make sure to file on time. If you're unable to file your taxes by April 15, be sure to file for an extension using IRS Form 4868, the Application for Automatic Extension of Time to File a U.S. Individual Income Tax Return. Doing so will buy you an extra six months to finish filing your taxes. However, be advised that this does not give you an extension on paying taxes due – meaning you'll be responsible for interest which accrues on the amount due. Special rules apply if you're serving in the military outside the country, or otherwise living out of the country, on April 15.
The delay of certain tax forms may affect you. Because the IRS was waiting on the American Tax Payer Relief Act to be enacted, some forms were delayed and not available until February or March. If your return includes these forms and you need to apply for an extension, special rules may apply. You won't have to pay the late-payment (failure-to-
Forms which were released late include: Form 3800 (General Business Credit), Form 4562 (Depreciation and Amortization)
Remember your 2010 Roth IRA Conversions. In 2010, a special rule required many individuals who did a Roth IRA conversion to include half of the taxable amount in their 2011 income and the other half in their 2012 income. Unless you elected to include the entire amount in your 2010 income and pay taxes that year, then remember to include the remaining taxable amount on your 2012 tax return. Check with your tax professional about any Roth IRA distributions you received in 2010 or 2011, just to be sure you file your return correctly.
Reconsider Roth IRA Conversions in 2012. You have until the April 15 deadline to undo, or recharacterize, your Roth IRA conversion from 2012. If you convert the Roth IRA back into a Traditional IRA, the IRS treats the conversions as if they never happened, and you won't owe tax on them. If you file an extension, you'll actually have until October 15, 2013, to recharacterize the Roth IRA and avoid paying taxes on the conversion.
If you choose to recharacterize, you are allowed to once again convert your money back to a Roth IRA after a 30-day period. If you reconvert during 2013 then you'll pay taxes on the reconversion when you pay your 2013 taxes.
Disaster victims should review casualty loss deduction rules. You may be eligible for a deduction if you lost property or sustained damages that were not covered by insurance. An example of this situation would be a hurricane Sandy victim who lost more property in an amount greater than their insurance reimbursed. The rules for these circumstances are listed in IRS Publication 547 (Casualties, Disasters, and Thefts).
Review gift tax return requirements. Certain individuals are required to file Form 709 for gift tax return. This rule applies if you gave gifts during 2012 which were not a gift to a U.S. citizen spouse, a gift to a qualified charity, interest gifts totaling $13,000 or less to any individual, or amounts paid to an educational institution or medical care provider on the behalf of any individual. If you need to file an extension, Form 709 will be included in the six month extension time. Many special rules apply to gift taxes, so be sure to check with your tax professional;
John Dubots is President and founder of Dubots Capital Management. Visit company website at http://www.jpdcapitalmanagement.com
Investment Advisory Services offered through John P. Dubots Capital Management, LLC, CA License # 0822926