If you’re anything like me, you still have yet to file your federal income taxes for 2010. In my case, the work is already 99% done. The 1% that is left to be completed is printing out the form, writing a check and making a trip to the post office on Friday or Saturday. The reason I haven’t filed my return is that since I owe money for last year, I don’t have the urge to send the government my check. Whether you’re delaying parting with your money until the very last minute (this year’s tax day is April 18th) or you’re just a procrastinator, there are a few things you’ll want to make sure you pay attention to when you file your tax return during the next few days. Following are some last minutes tips to help reduce your tax liability.
A lot of people will take the standardized deduction on their tax return because it’s less hassle and less paperwork. But that thinking could be costly to you if you choose to ignore itemized deductions. Anything from state and local income taxes, property taxes to medical expenses, mortgage interest and charitable contributions are all tax deductible. Gathering all the necessary paperwork will require some extra work but do the smart thing. Spend the extra time and save yourself some money.
All of those little $20 donations can really start to add up for you but only if you keep track of all of them. Dig up those receipts, confirmation letters and bank statements to make sure you’re not missing anything.
Keep in mind also that any contributions you made to Haiti relief during the beginning of 2010 you can deduct toward your 2009 tax return. You won’t need to wait until next year.
This one has nothing to do with how much you’ll pay in taxes but instead the way you file your taxes. Most Americans now choose to file their taxes electronically but if you’re one of the ones that still files via snail mail, consider making the switch to e-filing. Among many benefits of using e-filing, your return will get filed faster and you’ll get your refund back faster too, if you are getting one.
If you’ve completed your return and find that your bill is a little higher than you’d like, you still have the chance to lower it by contributing to an individual retirement account. The IRS gives you until April 18th to make your 2010 contribution of $5,000 into your IRA accounts. Roth IRA contributions won’t give you any tax benefit this year but if you qualify to make a deductible traditional IRA contribution do it and take the tax deduction to reduce what you owe. There are many brokers offering incentive for starting a new IRA account (see which broker is the best for an IRA account).
Getting a big fat refund check in the mail from the IRS might be one of your favorite moments of the year but financially it doesn’t make a whole lot of sense. That big refund ultimately is an interest-free loan you’ve made to the government. Granted interest rates are miniscule right now but in normal times that money is better served sitting in your own account earning interest and remaining available for your use throughout the year.
If you’re one of those getting a big refund, contact your HR department to adjust the withholding on your paycheck so you get back that money throughout the year.
Filing An Extension
If there’s just no human way that you’re going to be able to file your tax return by April 18th, make sure you file Form 4868 to request an extension on filing your taxes. This will give you until August 18th to get everything in order.
One thing though – filing for an extension won’t give you extra time to pay. If you don’t pay up by April 18th, you’ll owe interest and penalties on the amount that you owe to the IRS.
Photo credit: TiggerT
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This post was written by David Dierking. David lives outside Milwaukee, Wisconsin and has been working in the financial services industry for over 13 years with a background in investments, accounting, and marketing. He earned his Chartered Financial Analyst designation from the CFA Institute in 2004 and was recently published in the Milwaukee Business Journal. You can also check him out at
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