1) Don’t panic. The returns are due on April 17th this year. This is due to April 15th falling on the weekend and April 16th being a holiday in Washington DC. If you can’t get your return completed and filed on time, file an extension. The federal form is 4868 and the Connecticut form is CT-1040-EXT. This will allow you until October 15th to file. The extension however only extends the time to file, it does not extend the time to pay. Any tax due needs to be paid with the filing of the extension.
2) Check the returns for completeness. Most returns today are prepared using a computer which handles all of the calculations, which is fine. What you need to review however is whether all of the income and deductions are declared.
3) Fund your IRA or Roth IRA. These can be funded up to April 17, 2012 for the 2011 returns. Both of these retirement vehicles are awesome and appear to be underutilizied by many taxpayers.
4) If you are married, see if married filing separate returns makes sense. You will have to run the numbers to see if this is appropriate.
5) Carefully review any offshore accounts or investments. First review the questions at the bottom of Schedule B, Interest and Ordinary Dividends. You may be required to file Form TD F 90-22.1, Report of Foreign Bank Account and Financial Accounts. Additionally, you may have a new filing requirement this year. Form 8938, Statement of Specified Foreign Assets may also need to be filed. Failure to file these forms will result in huge penalties.
6) Carefully review the use tax. Connecticut retailers charge and collect the Connecticut sales tax. If however, you purchase goods and services for which a sales tax was due but not charged, you will owe a use tax. This tax is self-assessed, which means you will need to calculate and disclose this tax. These transactions tend to be purchases that were made either online or through a catalog for which a tax may be due.
7) Start planning for 2012. Now that 2011 is in the books, it’s time to start planning for 2012. Paying estimated taxes, adjusting withholding, or increasing your contribution to your 401(k) plan are just some of the items to review. The time to get on these is now before too much of the year goes by.
ACTION ITEM: Connecticut taxpayers should take these seven steps before filing their income tax return.
Thomas F. Scanlon, CPA, CFP®