Time to Start Thinking About Taxes...
ALEX CHADWICK, host:
From NPR News, it's DAY TO DAY.
Dear listeners, the IRS is already accepting electronic returns for last year. You don't have to file yet, of course, but you do have to start thinking about it.
And our personal finance contributor, Michelle Singletary, is here with some tips. Earlier, I asked Michelle is there any advantage at all to filing early if you owe?
MICHELLE SINGLETARY: If you are a procrastinator and you think you're going to be right up to the deadline and maybe not get it done.
CHADWICK: How did you know?
(Soundbite of laughter)
SINGLETARY: You might want to do it early, but there is no advantage to paying it early. You get, maybe to keep your money and earn interest on it a little longer, which of course the IRS is going to tax you on, the interest, I mean. So you know, as soon as you get your forms, I think it's best to go ahead and file in a timely manner. You don't want to wait until the deadline.
CHADWICK: Just because it's 2007, does that mean that there's nothing more you can do to improve your situation for 2006? I'm not talking about, you know, backdating checks or anything. But is there something you can do that would be legal?
SINGLETARY: Yeah. I wouldn't recommend backdating any receipts, because IRS does not play.
But one thing that you can do if you have not made any contributions to Individual Retirement Account or a Roth IRA, you have up until the tax filing date, which this year is April 16th. In some states, it's actually April 17th. And if you're 50 or over, you get to put in an additional thousand dollars, it's called a catch-up contribution of a $1,000. So all total, if you're 50 or over, you could put in $5,000.
CHADWICK: Does the IRS send out a list of common mistakes that people make that, you know, you might be able to think about and avoid?
SINGLETARY: Definitely. Every year they have their top tax return mistakes. And interesting enough, the first on they list usually is math errors. People not just adding up wrong, but maybe transposing numbers or something to that extent, often a wrong Social Security number, either for yourself or dependents. Filing single when you should file head of household if you are a single parent. And listen, one of the mistakes people forget is to sign the return.
CHADWICK: Okay. Well, how about this? How about looking ahead? What should you start doing now to make 2007 a good tax year?
SINGLETARY: One thing. Lots of people love getting huge refunds and that just drives me crazy. If you are getting a high refund, and the average refund last year was more than $2,000, you need to revisit your W-4 form. You need to change it, fill it out, so that you get that money in your paycheck, because I know you got bills that you need to pay, a credit card debt that you should be paying on a month to month basis rather than waiting at the end of the year to get this money.
CHADWICK: So you adjust how much is being withheld from your check, take more cash up front, you get a smaller return, but you get to use the money.
SINGLETARY: That's right. When you fill out your W-4 form, you have allowances, which basically equal to deductions that you're taking, and then you adjust those, so that you get more money in your paycheck. And you get your money throughout the year rather than waiting for this big check. I know lots of people think of it as a forced savings plan. But why don't you force yourself to get that money every month, put it in a savings account and earn interest on it, rather than letting the government use it without giving you some interest.
CHADWICK: Michelle Singletary, the author of the syndicated column The Color of Money and DAY TO DAY's regular guest for personal finance discussions. Michelle, thanks again.
SINGLETARY: You're welcome.
CHADWICK: And if you'd like Michelle to answer your money questions, just e-mail them to us. Go to our Web site NPR.org, click on the Contact Us link, you'll find it at the top of every page. And please be sure to include Michelle in the subject line.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.