File 2010 taxes and you could get a refund, or at least use your AGI to e-file your current year 2011 return
Still haven’t filed those 2010 taxes? It’s not too late. You can still file and there are plenty of good reasons to do so.
First of all it’s the law, and if you don’t file you could potentially face prosecution from the IRS. While this is a remote possibility, and an extreme step on the part of the agency, it is still a repercussion best avoided.
On the brighter side, you could very well be due a refund. Many late filers just assume the IRS will heap tons of fees and penalties on them, but that’s not usually the case. The majority actually get money back – but you have to file soon. The IRS only hands out refunds for the last 3 years.
If you do owe tax money, filing a 2010 tax return sooner rather than later will cut down on the penalties and interest that you end up owing on your back taxes.
Not to mention, you may need information from your 2010 return in order to fill out your taxes for 2011. For example, capital losses that exceed a certain limit are deductible and can be carried forward into future years. But in order to receive that benefit for 2011 you will have had to submit a 2010 return.
The most important piece of information you need from your 2010 return is your 2010 adjusted gross income (AGI). If you want to e-file a 2011 return, you will need to enter either your 2010 AGI or the PIN you used to file your 2010 tax return in order to verify your identity and sign your e-filed return.
Not having a 2010 AGI could cause you significant trouble when you try to e-file a 2011 return. Without a 2010 AGI or PIN to sign your return, you will have to enter $0 as your AGI. In previous years, the IRS more easily accepted returns entered with $0 for the AGI. This tax season, however, the IRS has been rejecting many of these returns, complicating the filing process considerably for delinquent taxpayers.
The easiest thing to do, if you haven’t yet submitted a 2010 or 2011 return, is to file your 2010 return as soon as possible. But because you cannot e-file prior year taxes, you will have to mail in a paper return, which can take 4 to 6 weeks to be accepted by the IRS.
By that time, however, the April 17 tax deadline. But IRS e-file stays open until October 15, so you have six months for your 2010 return to be accepted by the IRS and then file your 2011 return. If you owe taxes, you will need an extension in order to file after April 17 without incurring penalties and interest. On the other hand, if you are due a refund, you can e-file any time between April 17 and October 15 without filing an extension and without incurring any penalties.
So you see, your tax life going forward will be much easier if your tax life of the past is all caught up and squared away. Plus it makes everything simpler if you file your returns in order. Don’t skip out on your prior year returns to just file the current. File your 2010 taxes before you take care of your 2011 return.
Photo via JD Hancock on Flickr.