Last-Minute Tax Tips
Taxpayers are entering the home stretch to file their 2009 taxes. If you haven’t finished figuring out your 1040 yet, you are not alone. According to the IRS 20% of tax returns arrive after April 1.
Are you one of the laggards? Don’t despair. With less than a week to go before that all-too-familiar April 15th deadline arrives, here are some last-minute, time-saving tax tips to help trim your tax bill and even maximize that refund.
Save for Retirement
Even procrastinators can save money on their taxes. An Individual Retirement Arrangement (IRA) is one of the best—and simplest—ways to save for retirement. If you discover that you have a big tax bill, you may be able to open a traditional IRA for the 2009 tax year to minimize your financial burden. But, like everything related to taxes, there are bells and whistles.
Here’s the lowdown: If you are under age 50, the maximum amount you can stash in a traditional IRA for 2009 is $5,000. If you are older than 50, the contribution cap rises to $6,000. But you also have to meet certain income restrictions to get the full tax benefit of an IRA. For example, if you are married filing jointly, your modified adjusted gross income must be $89,000 or less to get the full-throttle deduction.
Setting up an IRA is simple, too. In fact, any brokerage firm will be delighted to help you open an account online or by phone before April 15.
You don’t have to give until it hurts. In fact, charitable contributions are another fantastic way to minimize the tax bite. In most cases, you can give up to 50% of your adjusted gross income in a given year to organizations such as churches, hospitals and nonprofit groups.
Sometimes, however, we don’t do the best job of tracking our philanthropic actions. Take a careful look at your credit card receipts and cancelled checks from the past year. Did you text donations to help earthquake victims in Chile or Haiti? Simply look over your phone bills to see what you gave. To claim a cash contribution exceeding $250, make sure you have a receipt or acknowlegement from the organization, too.
It’s also smart to establish a paper trail if you gave away a lot of stuff such as clothes or furniture last year. In addition to donations, keep in mind that mileage to and from volunteering is deductible. For more information on donating to charity, see these very detailed guidelines on the IRS website.
Because so much giving is done online, create a folder in your email inbox at work and at home labeled “Charitable Donations” to monitor future gifts. I also keep my financial house in order by tracking charitable contributions with budgeting software from FinanceWorks, which is offered by my credit union. It has changed my financial life.
Taxpayers can go online to prepare as well as e-file taxes up to the 11th hour with TurboTax– it’s fast, easy and convenient. Plus, filing your taxes online minimizes the risk of a making a mistake. In fact, the error rate among paper filers is 20%. For e-filers, it is less than 1%.
Filing online also helps you avoid those the long lines at the post office. And, you can get your refund back in as little as eight days with direct deposit.
Buy a Home
It’s still not too late to get the First-Time Homebuyer Credit. To qualify, you must be in contract to buy a principal residence on or before April 30, 2010. You will have to close on your new home by June 30, 2010.
If you qualify, you may be eligible for a maximum tax credit of $8,000. To get that hefty credit, you will not have owned a primary residence during the three years up to the date of purchase. You must also meet certain income restrictions: your adjusted gross income cannot be more than $75,000, or $150,000 for joint filers.
If you don’t qualify for the first-time homebuyer credit, don’t despair. You could be eligible for a long-time resident credit of up to $6,500.
There is a significant amount of documentation required if you want to receive either of these credits, which is why the IRS doesn’t let you e-file. The IRS offers extensive information about the ins and outs of the homebuying credit on its website.
Get an Extension
Need extra time? Taxpayers who file for an extension will get an extra six months to file. You new deadline will be Oct. 15 2010. But remember: An extension to file is not an extension to pay taxes. TurboTax Easy Extension allows you to file your personal or business extension online. And a federal extension doesn’t grant you an extension on your state tax return. For guidelines for your state, click on this list of state tax websites compiled by TurboTax.
If you owe money to the IRS and you don’t think you can pay the bill, don’t dilly dally. You still need to file your taxes. File your return as soon as possible, preferably before midnight on April 15. Why? Failure to file your taxes is a federal offense that could have significant legal ramifications.