Finish Rich
April 7, 2004 Transcript


CNN American Morning

Tune in this Wednesday morning at 7:45am for some tips on last-minute funding of IRA accounts - David will answer the following questions:

Bill: All right. You have just about a week left before you file the tax return. Do not rush. That is one piece of advice on how to avoid mistakes this year. Our resident personal finance contributor David Bach, author of "The Automatic Millionaire" here with some tax tips. You say when in a rush, keep it simple. Easier said than done come April 15th. Looking at some of these tips, some of these seem very basic. Very rudimentary.

David: This is coming right from the IRS. We asked the IRS "What is the single biggest mistake people make?"
  • They can't read our handwriting.
  • Tell everyone to use the stickers, the labels you get in the mail. Even if the address is wrong, just cross out the address and update it, but at least we can read your name. If you write this out, please, they said, tell everybody to use their best penmanship. If we can't read your name or social security number, we'll have a problem. If you have kids, put their social security numbers down. That's important. Especially if you want the child credit.
  • Double check the math. This is the stuff they teach you back in math class. Put a bracket around minus signs.

Bill: That was the first screen. There's another screen. These are basic. Only check one filing status. Sign and date returns. Do people forget that?

David: Believe it or not, they do. A lot of people put single and jointly on the same tax return. You can't do both. Also make sure you make a copy of your tax returns. This is really my last tip here. Not only make a copy, but send it through the US Post Office. Get it certified and get them to get a signature return card. That means the IRS will actually sign that they received your taxes, return and mail that back to you. You take that, staple to the copy of your tax return, put it in a file. Now you've got proof that you mailed it to them and proof that they received it.

Bill: And you can back it up. Always great advice there. Filing is one thing. But paying is another. Your advice there?

David: They don't want you to make the check out to the IRS. It's the United States Treasury. Remember, everybody, United States Treasury. Also, people forget to sign their checks. Sign the check. They want four things on your check. They want not only your name and signature, but what filing form did you use, what year you are paying, your social security number. All of that right on the front of your check. That kind of makes me nervous. That's a lot of personal information. The IRS point is these checks get separated from your tax returns and sometimes they get the check and don't know what it's for. If it has all that on the front of the check it makes it easier.

Bill: Also when paying, using a credit card. Is that a good advice or not?

David: I'm against it, but you can go to a website, www.pay1040.com. If you pay your taxes on a credit card, there's a cost. 2.49%. Make it simple 2.5%. On $1,000, it's going to cost you $25 in a servicing fee to use a credit card, and if you keep that debt on your credit card and an interest rate of 20%, that's a bad deal.

Bill: If you say it, I believe it, too. For people to get the refund quickly. Let's talk about your mantra to fund your personal retirement accounts. Here's some of the amounts for people to remember. Take a look at some of these.

David: It's not too late.

Bill: Also, certain people need to make withdrawals from their retirement accounts. To whom does that apply?

David: $3,000 per person if you are over 50 you can still put $3500 away up to the date of April 15th. Sep IRAs you can put away up to $40,000. Under the age of 50, there's still the opportunity to put $3,000 in an IRA account, over the age of 50 again for the spouse, $3500. Last thing. If you are 70 years old, you got to start pulling money out of your IRA account. At 70 1/2, 5% of the money in your IRA has to come out. If you don't do this, the penalty is 50% of what you are not withdrawing. If you have parents who are older, make sure you check with them and say, are you taking the withdrawals required out of your IRA. The last thing on that note, it's combining all your IRA Accounts. It's the combined total.

Bill: Last comment. If you could give any bit of advice in this final week for last-minute filing, what is it?

David: Itemize your tax deduction. That's how you'll get more money back. Go to www.ors.gov. I believe this is true. If you spent 30 minutes at this website, you would find tips that the IRS is giving you that would put money back in your pocket. Even if you used a CPA because I'm promising you, there are things on this website that the IRS will tell you that your cps is not looking at.

Bill: David Bach is host of a nationally syndicated radio show which airs Saturday afternoons on Sirius Satellite. And catch David every Wednesday here on American Morning with more tips on how to improve your financial life.

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