October 15 Tax Deadline Nears

The last significant deadline for individual taxpayers occurs next week on October 15 when individual tax returns on final extension are due. Taxpayers who requested an additional extension beyond August 15 and received approval from the Internal Revenue Service have until midnight October 15 to file their 2001 tax returns without risk of penalty for late filing. The late filing penalty is 5% per month of any unpaid tax, up to a maximum of 25%.

All taxes owing for 2001 should have already been paid by last April 15 when the first extension request was filed. Late tax payments are subject to underpayment penalties and interest.

In addition to the tax return filing deadline, taxpayers who filed their 2001 tax return on a timely basis, including extensions, and who want to recharacterize Individual Retirement Arrangement (IRA) contributions or conversions from traditional IRAs to Roth IRAs made during 2001 have until October 15, 2002 to recharacterize. This may be a popular task this year due to the steady decline of the stock market and subsequent drop in value of retirement account balances.

In order to perform the recharacterization on a timely basis, taxpayers need to make arrangements with their IRA account trustees by October 15. For taxpayers who have already filed their 2001 tax returns and whose IRA recharacterization results in a change in 2001 income taxes, an amended tax return must be filed to claim a refund for 2001 taxes. Taxpayers should check the laws for their particular state to find out if an amended return is due at the state level as well.

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