Tips to Avoid Tax Time Stress

The Internal Revenue Service is making extra efforts this tax season to help taxpayers address economic hardship issues or get help claiming any of the special tax breaks in last year’s American Recovery and Reinvestment Act (ARRA).

“The IRS recognizes that many folks may be going through some tough financial times right now,” said Clay Sanford with the Dallas IRS office. “Unfortunate events such as job loss or tapping a retirement fund can obviously have an impact on taxes.”

If you cannot pay the full amount of taxes you owe by the April 15 deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You should also contact the IRS to discuss your payment options at 1-800-829-1040. The agency may be able to provide some relief such as an installment agreement or an offer in compromise.

More than 75 percent of taxpayers eligible for an Installment Agreement can apply using the Web-based Online Payment Agreement application available on IRS.gov. To find out more about this simple and convenient process, type “Online Payment Agreement” in the search box on the IRS.gov homepage.

Sanford said that doing some research at IRS.gov can pay off for some folks. For instance, if your income decreased because of a layoff or a cut in wages, you may be eligible for certain tax credits, such as the Earned Income Tax Credit (EITC). ARRA provided a temporary increase in EITC and expands the credit for workers with three or more qualifying children.

Also, consider using an electronic filing program (e-file) this year, especially if you haven't done so in the past. E-file programs guide you through the filing process, ask questions and help you check for deductions and credits you might otherwise miss if you file using paper forms. There were a number of federal tax incentives enacted last year as part of ARRA, such as the Homebuyer Credit and the American Opportunity Credit. The average federal refund totaled $3,036 by mid-March, an increase of $266 compared with the same period a year ago. If you owe tax, you can even pay by credit card using e-file.

"Just resist the temptation to put off your taxes until the very last minute," Sanford added. "Rushing to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error."

If the April 15 clock runs out, you can get an automatic six-month extension of time to file until October 15. However, this extension of time to file does not give you more time to pay any taxes due. To obtain an extension, just file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Form 4868 is available at IRS.gov or you can call 800-TAX-FORM (800-829-3676) and have a paper form mailed to you.