Times up!  Well, almost.  If you haven’t even started work on your 2007 tax return, it may be time to consider filing an extension.  The good news is that it is fairly simple and will buy you some additional time to get your act together.

The first thing you should know is that by filing an extension, you will get an additional six months to file your return.  This means that your filing deadline is moved forward from April 15, 2008 to October 15, 2008. 

Very important:  Filing an extension gives you extra time to get your tax return to the IRS, it does not give you more time to pay any amounts owed.  If you think you owe, send a check for the estimated amount with the extension.

With that little warning out of the way, lets take a quick look at the penalties you could face for not paying on-time.  You can be charged 5% per month on any amounts owed, up to a maximum of 25%.  If you do not pay taxes you owe when you file an extension, the penalty is 0.5% per month, plus interest.  As you can see, even if you don’t have the funds available to pay the taxes you owe, it is still in your best interest to file an extension.

You will file your extension using IRS Form 4868.  Here is a link to the IRS publication: Form 4868, Application for Automatic Extension of Time To File U.S. Income Tax Return. 

Most tax preparation software can help you complete the form, or you can fill it out by hand and mail it in (it’s short).

Disclaimer:  The author of this post is not a tax professional, and the information provided, while believed to be accurate, is for educational purposes only.  Everyone’s tax situation is different, please consult a tax professional before acting on any advice on this site.

Originally posted on pfhacks.com: How To File An Extension

Here are some highlights:

The Department of the Treasury, Financial Management Service (FMS) will begin issuing approximately 130 million Economic Stimulus Payments on behalf of the Internal Revenue Service in early May 2008. The majority of the payments will be issued to eligible taxpayers during an 11-week period starting May 2nd and concluding on July 11th.

Approximately 30 to 45 million of the payments will be made by Direct Deposit to taxpayers who file a 2007 tax return and provide bank account information. Taxpayers who do not provide bank account information on a 2007 tax return will receive payment by paper check.

The majority of Economic Stimulus Payments by Direct Deposit will be completed by May 16, 2008, although payments by Direct Deposit will continue in smaller volumes through the end of calendar year 2008.

So, if you filed your 2007 tax return electronically, you should look for your stimulus rebate to be deposited directly into your checking account.

When will you receive your stimulus rebate? That depends on the last two digits of your social security number. Here is the IRS schedule for transmitting, or mailing, rebates:

DIRECT DEPOSIT

PAPER CHECK

Originally posted on pfhacks.com: Details On Economic Stimulus Payments

Continuing our tax theme, we will run a series detailing some of the most common tax forms you have received, or will be receiving, in the next few weeks. 

First up is the W2.  All information is for the 2007 tax year.  Forms will sometimes change from year to year, so check the irs.gov web site for the latest information.

Form W2 is completed by your employer, and the information it contains is reported to the IRS.  Your employer is required to provide you a copy of your W2 before January 31. 

A W2 basically reports wages paid to you by your employer throughout the year.  Additionally, it shows all taxes that were withheld from your earnings. 

Form W2 contains a series of lettered and numbered boxes.  You can click the image above to view a larger image as we go along.

Lettered Boxes

Box a: Employee’s social security number.  You should verify that your number is correct to avoid reporting problems.

Box b: Employer identification number (EIN).  This number identifies your employer to the IRS for tax purposes.

Box c: Employer’s name, address, and ZIP code.

Box d: Control number.  This number is used by your employer for record tracking purposes.  It’s OK if it is blank.

Box e & f:  Your name and address.

Numbered Boxes:

Box 1: Wages, tips, other compensation.  This is your total taxable wages, tips, and other compensation, (before any payroll deductions).

Total wages  include:

1. Total wages, bonuses (including signing bonuses), prizes, and awards paid to you during the year.
2. Total noncash payments, including certain fringe benefits.
3. Total tips reported by the employee to the employer (not allocated tips).
4. Certain employee business expense reimbursements.
5. The cost of accident and health insurance premiums for 2% or more shareholder-employees paid by an S corporation.
6. Taxable benefits from a section 125 (cafeteria) plan.
7. Employee contributions to an Archer MSA.
8. Employer contributions to an Archer MSA if includible in the income of the employee.
9. Employer contributions for qualified long-term care services to the extent that such coverage is provided through a flexible spending or similar arrangement.

Box 2: Federal income tax withheld. This is the total federal income tax withheld from the your wages for the year.

Box 3: Social security wages.  The total amount of your earnings that are subject to social security tax.  This caps out at $97,500 for 2007.

Box 4: Social security tax withheld.  The total amount of social security tax withheld from your wages.  For 2007 this amount should not exceed $6,045.

Box 5: Medicare wages and tips.  Similar to social security wages, except that there is no wage limit at which you no longer have to pay this tax.

Box 6: Medicare tax withheld.  The total amount of Medicare tax withheld from your wages.

Box 7: Social Security Tips.  Tips that you reported to your employer.  If you did not have tip income, this box will be blank.

Box 8: Allocated tips.  if you work for a food or beverage establishment, some tip income may be allocated to you regardless of how much you report.

Box 9: Advance EIC payment.  From irs.gov:

The advance EITC allows taxpayers who expect to qualify for the Earned Income Tax Credit (EITC) and have at least one qualifying child to receive part of the credit in each paycheck during the year the taxpayer qualifies for the credit. The credit is sometimes called the AEITC.

Box 10: Dependent care benefits.  Amounts over $5,000 are reportable.

Box 11: Nonqualified plans.  This box shows any amounts distributed to you from your employer’s non-qualified deferred compensation plan or a nongovernmental Section 457 pension plan.

Box 12a: Uncollected social security or RRTA tax on tips..
Box 12b: Uncollected Medicare tax on tips.
Box 12c: Taxable cost of group-term life insurance over $50,000.
Box 12d: Elective deferrals and designated Roth contributions.

Box 13:

• Statutory Employee:  If this box is checked, you are not subject to income tax withholding.  See you accountant for filing details.
• Retirement Plan: This box will be checked if you were an "active participant" in your employer’s retirement plan (i.e. pension or 401k).
• Third Party Sick Pay: This box wouldn’t be marked on a W2 from your employer.  If you received sick pay from a third-party insurer, they will send you a separate W2.

Box 14: Other.  This is a catch-all.  If there are amounts in this box, they should be listed with a description.

Box 15: State.  Employer’s state ID number.  If you earned wages in more than on state, there may be multiple id numbers listed.

Box 16: State wages, tips, etc.  All income earned by state.

Box 17: State income tax.  The amount of state income tax withheld from your earnings.

Box 18: Local wages, tips, etc.  The amount of wages subject to taxation on a local or city level

Box 19: Local income tax.  The amount of local or city tax withheld from your wages.

Box 20:  Locality name.  This could list a city, state, or it could be blank.

Originally posted on pfhacks.com: How To Read a W2