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Daily Tax Tips April 2014

It's finally here. April. The month that you must file your 1040 or Form 4868 to get six more months to finish the paperwork.Tax_tip_icon_pencil_point

Either way, if you owe Uncle Sam, you must send that amount or a close estimate of it by April 15. If you don't, you'll end up with a bigger bill thanks to penalties and interest.

To ensure you don't run into that or other problems, check out these April 2014 Daily Tax Tips.

And if you've already finished your 2013 filing duties -- I am sooooo jealous! -- you'll also find some tax planning moves to help you cut your 2014 tax bill.

One administrative note. While the January, February and March tax tips list featured a piece of tax advice each day, including weekends, of those months, the April tips will end on the 15th.

But don't worry. I know that tax considerations continue year round. But we're going to catch our breath a bit and switch to weekly tax tips from mid-April through the end of December.

Again, many of the April tips will be from  Bankrate's annual tax guide. Others are original Don't Mess With Taxes advice.

Regardless of the source, and when we switch to weekly tips, you'll find a featured tip in the upper right corner of the the ol' blog.

Or you can bookmark this page, where you can catch up with the Daily Tax Tips for April2014 at your leisure, as well as follow the links at the end of the page to the filing season's earlier advice.

  1. Zero capital gains tax for some investors -- This is not an April Fools Day joke. Some investors will not owe the Internal Revenue Service a cent of tax when they sell their assets. But, as usually is the case in the tax world, there are some limits. First, the 0 percent capital gains tax rate applies only to long-term assets. These are the ones owned for more than a year. Short-term sales remain taxed at your ordinary tax rate. Second, this no-tax rule has an earnings limit. It applies only to the two lowest tax brackets, 10 percent and 15 percent. Because of the progressive system of the tax code and the specifics of the no-capital-gains-tax law, some higher earners still might benefit from this provision. So check it out. Any time there's a chance you won't owe Uncle Sam anything, it's worth looking into. No joke. (April 1, 2014)
  2. Roth rules -- Roth rules as a retirement account as long as you follow the tax rules. The annual maximum contributions, both regular and catch-up, are the same for a Roth IRA as a traditional IRA. You also have until the April 15 filing deadline to put in money for the prior tax year. But after that, the Roth rules change. The major appeal of a Roth account is that it provides tax-free retirement money. This is in exchange for no immediate tax deduction of your contributions. You also won't face any required minimum distributions on a Roth. And you can keep contributing to it regardless of your age as long as you're earning income. (April 2, 2014)
  3. Tax advantages of traditional IRA -- Many people still use this type of IRA, primarily because it offers them an immediate tax deduction. The deduction doesn't require itemizing; it's one of the above-the-line deductions found on both the 1040 and 1040A forms. And you can open a traditional IRA for the prior tax year or contribute to one you already have as late as the April 15 filing deadline. Note, however, that if you or your spouse has a retirement account at work, you might not be able to take a full deduction. The work sheet in the tax form instructions will help you figure out how much of your traditional IRA contribution you can deduct. (April 3, 2014)
  4. Tax reward for retirement savings -- The tax code offers lots of incentives to encourage individuals to save for retirement, but one that can directly cut your current tax bill often is overlooked. The saver's credit, formally known as the Retirement Savings Contributions Credit, could net eligible taxpayers $1,000 at filing time. But it's not for everyone. The credit was created for moderate- and lower-income taxpayers; it's phased out as a saver's income increases. And only $2,000 of your contributions count in figuring your credit amount, with half that amount being the maximum possible credit available. Still, it is a tax credit, meaning any amount reduces your tax bill dollar for dollar. So check it out. (April 4, 2014)
  5. Energy efficient home improvement tax break might be renewed -- The tax credit for making some relatively easy upgrades to your residence's energy efficient expired at the end of 2013. But it was been added to the package of extenders, those tax provisions that expire periodically and must be approved again by Congress, that passed the Senate Finance Committee on April 3. The provisions in the most recent version are extended through 2015 and again would allow for a lifetime maximum credit of $500. But the new version also expands the types of energy efficient roofing material that would be eligible for the credit. (April 5, 2014)
  6. The value of refundable tax credits -- Refundable tax credits not only reduce your tax bill dollar for dollar, when you zero out what your owe Uncle Sam you get the excess credit as, per the name, a tax refund. Three popular refundable tax credits are the Earned Income Tax Credit, the Additional Child Tax Credit and the American Opportunity education tax credit. There's no doubt that many people, especially during the recent U.S. economic travails, have depended greatly on the help from these refundable credits. But many people still question whether from a wider perspective they are worthwhile. Look for the issue to be part of any serious tax reform talks. (April 6, 2014)
  7. Don't miss miscellaneous deductions -- Life is full of things that aren't easily pigeonholed. Taxes are like that, too. That's why there's a place for expenses that don't fit into usual tax categories. They are deductible as miscellaneous expenses on Schedule A. The problem with this group is that before you can deduct the expenses, they must exceed 2 percent of your adjusted gross income. If your AGI is $30,000 then you need more than $600 in miscellaneous deductions before they do you any tax good. And note the "more than" requirement. If you have $650 in miscellaneous expenses, only $50 counts on Schedule A. To get over that hurdle, you can count a variety of unreimbursed employee expenses, investment related fees and even what you paid last year to have your taxes done. (April 7, 2014)
  8. Red flags that tempt the tax auditor -- The IRS is auditing fewer returns, but the chances of your 1040 being more closely examined are higher if you have one of these red flags. Small business get extra attention because there are fewer third-party verifications of earnings and payments, making it easier for the filer to report less taxable income. Returns of richer individuals, already getting whacked by added taxes, also get closer IRS attention because they present the better opportunity for additional collection. And if your itemized deductions deviate from the average amounts for your income range, what the agency calls its discriminant information function, or DIF, will likely get your return pulled for audit. (April 8, 2014)
  9. Choosing between Schedule C and C-EZ -- As a sole proprietor, you get a choice of which form on which to report your self-employment earnings. As the name indicates, the C-EZ is a streamlined version of the more-detailed Schedule C. So when can -- should -- you use one form over the other? Check the full name of the C-EZ: "Net Profit from Business." If your business has a loss, then you must use the long form, known officially as "Profit or Loss From Business (Sole Proprietorship)." You also can't have a lot of expenses; the maximum for C-EZ filing is $5,000 or less in company expenditures. While it's longer and, yes, more complicated, the longer Schedule C might be a better choice. In addition to counting more company expenditures, you're able to depreciate business property and can claim your home office, either using the more detailed original version or the new simplified home office deduction claim. If you have a choice between the C or C-EZ check them both out to make sure you use the form that gives you the best tax result for your business. (April 9, 2014)
  10. Don't deduct that! -- Deductions, either itemized or above-the-line, are a handy way to reduce your taxable income. Less income generally means a smaller tax bill. But if you claim one of these 10 deductions, you could end up paying more in penalties and interest on these bad claims. They include your homeowner's hazard insurance policy, your home phone and commuting costs. But there are some related deductions that you can claim. You might be able to deduct private mortgage insurance, your business phone calls and get a tax break from your employer to help cover some costs of getting to and from work. Check out all 10 "almost" deductions you don't dare deduct and the ones in that tax area that are OK to claim. (April 10, 2014)
  11. Online tax-paying options -- You've gone totally 21st century paperless, no longer writing paper checks. That's not a problem when it comes to paying your tax bill. The Internal Revenue Service gladly accepts a variety of electronic tax payments. You can use a credit or debit card by going to IRS-approved vendors Official Payments, Link2Gov and WorldPay. You can pay via electronic funds withdrawal, or EFW. This essentially is the reverse of the direct deposit that the IRS recommends for those getting refunds. Or you can go to the Electronic Federal Tax Payment System, known as EFTPS, website to pay your April 15 and other tax bills year-round. But check the e-pay options carefully. Most involve some sort of charge in addition to your tax bill. (April 11, 2014)
  12. State e-filing is popular, too -- The Internal Revenue Service's success at getting us to electronically file our federal returns is being replicated at the state level. Around 93 percent of state individual income tax filings this season have been e-filed. That's up 4 percent over last year as of mid-March. A key reason for the growth of e-filing at the state level is that so many states make it so easy. They also make it free, either via direct filing at the states' tax departments or through partnerships with private tax preparation software manufacturers. Check your state's tax department website to see what e-file options are available for you there. And make sure you don't miss the filing deadline, which in most states also is April 15. (April 12, 2014)
  13. Getting more time to file your tax returns -- Millions of taxpayers every year just can't get their returns done by the April 15 filing deadline. No problem, says the Internal Revenue Service. All you have to do is file Form 4868. That will give tax procrastinators six more months, until Oct. 15, to finish their tax paperwork. Most states that require returns from their residents also follow the April 15 deadline and apply the federal request for more time automatically to the state deadline. But remember, the extension is only to file the forms. Both state and federal tax collectors demand that you pay any tax you owe by the due date. (April 13, 2014)
  14. Ways to pay a big tax bill -- Can't come up with the money to pay your huge tax bill? Don't worry. The Internal Revenue Service offers several different ways to pay. If you have a big enough credit card line, you can pay with plastic -- the IRS You can use a credit has approved Official Payments, Link2Gov and WorldPay to take credit (and debit) payments -- and then pay off that account's bill over time. You can set up a installment plan directly with the IRS. Or if you just can't pay off your full tax bill even over time, you can try to convince the IRS to take less via an offer in compromise. All of these routes, however, will cost you more. There's the interest charges on credit card balances or a payment plan with Uncle Sam. And installment plans and offers to pay less require upfront application fees. (April 14, 2014)
  15. It's Tax Day! Time to file something -- April 15 is finally here. You must file your 1040 or an extension request or you could end up owing the Internal Revenue Service even more money. The IRS considers your return as filed on time as long as, if you snail mail it, it has an April 15 postmark. If you plan to e-file, you have until midnight your local time to hit the send button. If you can't do either of those things in the next few hours, then you need to get Form 4868 en route to the IRS today. This extension request is automatic and will give you six more months to file your paperwork. But note that the IRS will give you added time to file your return only. You must pay any tax you owe or the meter starts running on penalties and interest. And remember that if your state income tax is due today, too, the same filing and extension rules likely apply to that return. (April 15, 2014)

Check out

January 2014 Daily Tax Tips

February 2014 Daily Tax Tips

March 2014 Daily Tax Tips

Want more? Check out the rest of the news and advice at Bankrate's Tax Guide, as well as Don't Mess With Taxes' ever-growing collection of year-round tax tips and money moves.