Last-minute tax tips

NEW YORK (CNNMoney.com) -- Tick....tick...tick. Tax Day is almost here.

You have until 11:59 p.m. on Tuesday, April 17, to file your 2006 federal tax return. That's true in most states as well, although five --Delaware, Hawaii, Iowa, Louisiana and Virginia -- actually have a later filing deadline.

As in years past, plenty of taxpayers will spend the last few days (or hours) scrambling to file their returns.

The IRS estimates that over 20 percent of taxpayers file their return during the final two weeks of the tax season.

But before trying to do your return at breakneck speed to meet the deadline, make sure you have all the documents you'll need (receipts, 1099s, W2s, etc.) to do the job right. If you don't, it may be smarter to file for an extension (See how below.)

But if you've got everything in hand, keep these last-minute tips in mind as you tackle all your tax forms.

You're short on time but don't overlook in haste all the deductions and credits you're entitled to that can reduce your tax bill or increase your refund.

For starters, consider these 10 don't miss tax breaks. For others, review the 1040 Form instructions, says Maureen McGetrick, a senior manager with the tax firm BDO Seidman.

Another potential deduction source: An IRA contribution. "The IRA contribution tends to be something that people throw by the wayside, but it can be a valuable deduction," McGetrick notes.

You may open an IRA account, if you don't already have one, and make a contribution until April 17 in order for it to count as your 2006 contribution, the limit on which is $4,000 (or $5,000 if you're age 50 or older).

Not all IRA contributions are deductible, however. You only qualify for a deductible IRA if:

• You have earned income.
• You're not covered by a retirement plan at work.
• You're covered by a plan at work but your modified adjusted gross income (AGI) is $50,000 or less ($75,000 for married couples filing jointly). That qualifies you to deduct your full contribution. You may take a partial deduction if your modified AGI is more than $50,000 but less than $60,000 (or more than $75,000 and less than $85,000 for married couples).
• You're not covered by a plan but your spouse is and your modified AGI is $150,000 or less. that qualifies you for the full deduction. But you may take a partial deduction if it's more than $150,000 and less than $160,000.

If you have questions about your taxes, consider taking advantage of some free resources that the IRS offers.

For starters, you can always call the IRS directly.

Taxpayers can call 1-800-829-4477 at any time to reach the IRS' TeleTax line, which offers pre-recorded tips on 150 tax topics. The IRS also staffs a help line at 1-800-829-1040 that is open from 7 a.m. to 10 p.m. local time from Monday through Friday.

If you have trouble getting your question answered by phone, you can also take your return to a local IRS Taxpayer Assistance Center. (Find the one nearest you.) You don't need an appointment, but be sure to call ahead as some offices may have relocated.

The IRS also offers free tax assistance programs to low-income and elderly taxpayers and members of the military. To see if you qualify, check with the IRS by calling 1-800-829-1040.

Maybe the most important rule when doing your taxes last minute is not to hurry because ultimately rushing can lead to mistakes. And mistakes can lead to penalties or delayed refunds.

"Be meticulous," says Cindy Hockenberry, a tax information analyst with the National Association of Tax Professionals. "When people are in a rush they usually get sloppy."

That means double check everything. Make sure the Social Security numbers on your return are entered correctly, all the necessary forms are attached, your check is included if you owe money, your return is signed and, if you're mailing your return, your tax package has enough postage.

Filing your return electronically can cut down on time spent preparing your return, and it can eliminate the worry that your return got lost in the mail or missed the filing deadline if you didn't check to see that it had a postmark of April 17 or earlier. (Here are some tips on how to electronically file your return safely.)

If getting your tax return done on time just isn't feasible, file for an extension.

Requesting one from the IRS is pretty painless and does not increase your chances of being audited. Just fill out IRS Form 4868 for an automatic six-month extension, and check with your state about what forms you need to apply for an extension there. (You can find the Web site for your state's taxation department here.)

Remember, however, an extension to file is not an extension to pay what you owe. You are still obligated to pay your 2006 taxes in full by April 17 or risk excess charges.

So you will have to make an educated estimate about what your total tax liability is for 2006, and if that amount is more than what was withheld from you during the year, you will have to pay the difference when you file your extension.

If your 2006 income is similar to what it was in 2005, you can use your 2005 return as a guide. But if your financial situation has changed, you're going to have to crunch some numbers to estimate your bill, said Jennifer MacMillan, an accredited tax advisor and enrolled agent -- a designation that allows her to represent taxpayers before the IRS.

Failure to pay what you owe will result in penalties and interest on the unpaid balance due. And if you owe taxes but fail to file for an extension, you will also get hit with a late filing penalty.

To be safe, send in a little more than your estimated unpaid balance in the event you've underestimated what you owe, says Kimberlee Phelan, a partner and certified public accountant with the New Jersey-based accounting firm WithumSmith + Brown.

"If you overestimate you can always get your money refunded or apply it to your 2007 taxes," Phelan says.

If you can't pay the full amount owed, pay as much as you can to reduce the interest and penalties. And if possible, send enough so that your payment on April 17 combined with the tax already withheld from you during 2006 makes up at least 90 percent of your total 2006 tax liability. That way, says IRS spokesman Eric Smith, you will only be charged interest on the remaining amount owed and not a late payment penalty, too.

Whether you file your return or file an extension, get proof that you sent it by April 17.

If you're sending things by mail, ask that the enveloped be postmarked April 17 and ask for a registered mail return receipt. You will pay a little extra for this, but it can save you from paying late penalties and interest if your papers are lost.

If you're filing electronically, you should get a confirmation number on screen or by email, which you should print out and keep in your files as proof of filing.

Paying as much as possible now will cut your late payment penalty and interest charges. But if you're going have trouble paying the remaining balance in the near term, you have a few options.

Depending on your situation, you may qualify for a 30- to 120-day extension, which you can request using the Online Payment Agreement application at the IRS Web site.

You can also apply for an installment agreement using IRS Form 9465. The agreement, if approved, lets you to pay the remaining balance in monthly payments. You essentially tell the IRS how much you can afford to pay each month. If you owe less than $25,000 and can pay it off within five years, you are in a great position to get approved, says Donna LeValley, a contributing editor to J.K. Lasser's Your Income Tax 2007.

You will pay a fee ranging from $43 to $105 to set up this agreement and you still face interest charges. If you make payments by credit card, you likely face a 2.5 percent fee as well. For a $10,000 tax bill, that is $250, on top of the interest your credit issuer will charge if you're carrying a balance.

-- MONEY Magazine's Amanda Gengler contributed to this report.

Are you heavily in debt? Need help getting out? Paula Zahn Now wants to tell your story. Send e-mails to debt@cnn.com.

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