Tuesday, April 13, 2010

April Tax Tip

Personal tax returns are due this year on April 15, 2010. Here are some last minute tips to check and see if they apply to your return:

Fund your retirement accounts. You have up to April 15, 2010, to fund many different plans, and a SEP plan can be funded up to the due date for the tax return, including extensions (so you may have up to October 15, 2010, to fund this type of plan). This remains one of the best tax strategies, and it is even better now that there are higher contributions permitted depending upon the type of plan and your age.

Don’t forget about the tax deductions for state and local sales taxes. If you live in a State that does not impose an income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming), you are permitted to deduct sales taxes paid in lieu of claiming a tax deduction for State and local income taxes. If you live in one of the states which does impose an income tax, you still may benefit from this if the amount of sales taxes paid was higher than the amount of income taxes paid (or if you purchased a car, boat or other big ticket item, it may pay to calculate this both ways).

Don’t forget to claim any credits for children, including child care costs. There are income limitations here but it never hurts to ask.

Don’t forget to claim any loan origination or other discount fees associated with a loan refinance.

Don’t miss thecollege education expenses. There are several different ways to claim these expenses, including the HOPE Credit, Lifetime Learning Credit and the qualified tuition expense deduction. There are different rules for eligibility for each of these college-related expenses.

Watch your prior years’ losses so no amounts that can be carried forward to 2010 and future years are missed. This is especially true for taxpayers who have real estate losses, along with capital losses from stocks and other sales of capital assets.

Make sure you verify any Forms 1099 you receive for 2009, as the IRS estimates that up to 10% of these common forms from brokers, banks and businesses contain errors. Also, if you sold any mutual funds in 2009 and previously had your dividends reinvested, make sure you include these reinvested dividends in your cost basis.

Finally, make sure that you did not overpay your Social Security (FICA) taxes in 2009. If you switched jobs in 2009, this is very common. The maximum you were required to pay in 2009 was $6,622- if your total amounts paid for FICA exceeded this amount, you may be entitled to a larger refund this year.

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