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Haven't Filed Your Taxes? Avoid These 3 Costly Mistakes

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In the rush to get your tax returns out the door, it's common to make costly mistakes. Let's look at three of the most common last-minute issues.

Getting An Extension? Don't Forget This Vital Step

If you can't get your taxes finished by the April 15 deadline, the Internal Revenue Service will freely grant you a six-month extension to file your taxes, giving you until Oct. 15 to get all your numbers and records together and put together a final return for filing.

But just because you can get a free extension to file doesn't mean that you get extra time to pay. Even if you request and receive a six-month tax filing extension, you're still liable for any tax you still owe. If you don't pay, then the clock will begin on interest and penalties for failing to pay.

At current rates, those charges will include 3 percent interest on the underpaid amount, plus an extra 1/2 of 1 percent in penalties for every month your unpaid tax is late. The penalty maxes out at 25 percent if you're 50 months or more late on your payments.

Still, extending is a smart move even if you can't pay, because if you don't request an extension and file 60 days late or more, then the minimum penalty becomes $135 or 100 percent of your unpaid tax, whichever is less -- regardless of what percentage of your total tax liability that ends up being.

In general, it makes sense to slightly overpay your expected taxes with your extension request so as to give yourself some breathing room in case your initial calculations prove to be incorrect.

Take All the Credits You're Entitled to Receive

Remembering to claim all the tax breaks that you deserve often gets lost in the shuffle.

The IRS estimates one out of every five federal tax filers don't claim the money they're entitled to with the Earned Income Tax Credit. The worst thing about missing it is that, unlike most credits, it is a refundable credit -- meaning that you can get money back from the federal government even if you don't owe any tax. Depending on how many eligible kids you have, we're talking about credits of as much as $3,250 to $6,044.

Other credits can also bring in big money. Whether it's the American Opportunity Tax Credit for education or the Child Tax Credit and Child and Dependent Care Credit for families, make sure not to miss out on any chance you have to cut your tax bill.

Make Sure Your Money Goes to the Right Place

For those of you expecting a refund, waiting can be the hardest part. Yet if you give the IRS the wrong information, it can be a lot harder for you to receive your hard-earned tax money back.

Direct-deposit options are a great way to get your refund, with turnaround times that are much faster than with mailed refunds, especially in combination with electronically filed tax returns. But it's essential that you get your bank account information correct, paying attention to your financial institution's routing number, your account number and your type of account. Make a mistake, and you could end up in IRS refund limbo -- especially if the incorrect information you use corresponds to someone else's existing bank account.

There are plenty of other mistakes that people make, but these three can be among the most costly and time-consuming to fix.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.

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Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

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Owe taxes less than $50,000. What form do I get.

Thank tou

April 09 2014 at 7:41 PM Report abuse rate up rate down Reply

I cannot locate the correct address for mailing "taxes due"....I have searched and searched without avail. Tks Do you also sent a copy of the 1040 along with your check? Tks

April 05 2014 at 4:50 PM Report abuse rate up rate down Reply