To File Or Not To File 
The Procrastinator's Dilemma 

• Correct Social Security Numbers and names for you, your spouse and all your children and dependents (NO MORE DEPENDENTS WITHOUT Social Security #'s)
• All W-2's and 1099's from employers and clients
• All unemployment and disability income
• DMV fees for each car, trailer, boat, motorcycle
• Property tax bill(s) and year-end statements from mortgages (watch out)
• Escrow settlement statement, if you bought, refinanced or sold your property
• All income and expenses related to rental property. If you bought or refinanced the property, you need the escrow or settlement statement.
• Gather copies of all invoices for major repairs, equipment or upgrades
• All stock & bond transactions on 1099-B, including the cost and purchase date of securities sold in 1999.
• Medical expenses, including dental, optical and insurance costs. Remember to make a list of all the trips for medical care - you can deduct the mileage
• Losses from theft, fire, flood, earthquakes, etc. Get copy of police and/or insurance report and a list of all items damaged or destroyed
• Job-related dues, subscriptions, equipment, tools, supplies and uniforms
• Job related travel, meals and entertainment costs
• Personal Injury awards - Have a professional review your settlement papers.

• Remove the loan payments - only the interest is deductible
• That large check for about $3,000? That's the down payment on your car - not an auto expense!
• Parking Tickets are never deductible (see Penalties, under Taxes, below)
• Compute your total mileage and your business miles - test to see if using actual expenses or the standard mileage deduction is more advantageous. 1999 mileage was 32.5 cents per mile until 03/31/99, then 32 cents per mile until 12/31/99.
• You paid cash for gasoline, but have no records. You can back into the cost

Bank Charges
• Non-Sufficient Fund fees on checks you write are not considered a reasonable and necessary business expense. They are not deductible.
• If you only have one bank account that you use for both business and personal - those monthly bank charges are basically personal , aren't they?
• Insurance:

Not or only partially Deductible
• life insurance
• Auto Insurance (compute personal use portion)
• Health Insurance - only deductible for your employees or if you have a qualified plan

Deductible - Usually
• Workers compensation
• Business liability
• Errors and Omissions
• Bonds ( unless the money is considered a deposit. Then it stays on your books as an asset.)
• Business Auto (prorate for personal use)
• Health for employees
  
  
Taxes Paid


Tax Paid- Not Deductible
• Federal Personal Income tax - Estimated payments, prior year income tax payments
• Penalties on unpaid taxes (PENALTIES ARE NEVER DEDUCTIBLE.)
• Payroll taxes withheld (you took it from the employees, it's included in wages)
• State Income Taxes are only deductible on IRS, not most state returns - controversy rages on - may state income taxes paid on business income be deducted on the Federal Schedule C?


Taxes Paid - Deduct to your heart's content !

• Business Property Taxes 
• Business auto registration 
• City taxes/License fees 
• Sales Taxes 
• Payroll taxes -only the employer's portion
• Tariffs, duties, fees 

Oh, you can't get these few things together by April 17th (March 15th for calendar year corporations)? Don't worry. File an extension. maybe even two! You can get up to 6 months extra to complete your recordkeeping or reconstruction efforts.

Great news. All extensions are now good for six months. So you have several more months to agonize over why you can't get your act together. No explanations required. If you still need time, individuals and partnerships can get second extensions.

     New this year! Prepare your extensions by phone.

Filing an extension gives you additional time to complete and file your return. It does not give you additional time to pay the taxes due. You need to make a reasonable guesstimate of what you expect to owe and pay.

However, just because you have no money to pay doesn't mean you should overlook filing an extension. It will save you 5% per month worth of non-filing penalties. (The non-payment penalties are only 1/2 % (not 5%, but .5%) per month.

In fact, if you file the return on time this year (including extensions), but do not pay, the late payment penalty will be cut in half to 1/4% [.0025] per month. All you need to is you file Form 9465 with your return to arrange for an installment agreement. Or call IRS at 800-829-1040, when you're ready to file your return and ask them to set up up on one by phone.

One last note - when you file the first extension, your first estimated payment for the current tax year is also due. You need to pay at least one-fourth of the total taxes you will expect to owe for the current tax year at that time.

Aha! Now, I understand why so many people don't file! There's too much to take into account. You can't be expected to remember this much! Even Isaac Asimov, the renown science and science fiction writer said that if he had to learn everything he needed to know to prepare his own tax returns, the world would have been deprived of many great literary works.
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Copyright © 1999-2006, Eva Rosenberg
Revised 3/31/06