Tax season has a way of turning even the most diligent
deadline-sticklers into big-time procrastinators. But, with
April 18 fast approaching (taxpayers will get an extra three
days to file their federal tax returns this year), now even the
foot-draggers who have yet to file their 2010 returns can find
solace in the following last-minute tips and tactics -
furnished by tax experts to help people maximize their returns
and minimize their tax-time angst:
Open and contribute to a tax-deductible Individual
Retirement Account (IRA).
"Contributions to a 'deductible IRA' not only help grow a
retirement nest egg, they may lower a person's taxable gross
income, potentially reducing their income tax and social
security tax liability," explains FPA member Laurie A.
Siebert, a tax expert and financial planner at Valley
National Advisers in Bethlehem, Pa. The deductible IRA is
mainly for wage earners who don't participate in (or lack
access to) an employee-sponsored retirement plan, though it's
available to others as well, depending on income. Consult
with a financial planner for help setting one up.
If you work for yourself, establish and contribute to
a self-employed 401(k) or Simplified Employee Pension IRA
The tax benefits it provides may exceed those of a deductible
IRA thanks to higher contribution limits.
Pounce on other tax breaks.
Examples include the Making Work Pay credit for wage-earners
(up to $800), the American Opportunity Credit for
education-related expenses (up to $2,500), "green" tax
credits for energy-efficient appliances and home
improvements, the Savers Credit for retirement plan
contributions (up to $2,000), and more. Keep in mind,
eligibility for these tax breaks varies according to income
"The bottom line is, you don't know what you don't know,"
says Siebert. A couple hours of research on websites such as
www.irs.gov can yield hundreds, even thousands of dollars, in
tax savings. "The IRS website has tons of information,"
Siebert adds. "You just have to be patient and look
Gotten married? Purchased a home? Had a
These kinds of life events may significantly impact one's tax
tab. For example, people who purchased a home from January
through April 2010 may capitalize on a now-expired federal
home buyer tax credit of $6,500 to $8,000.
Time to itemize deductions?
When circumstances change, people who haven't itemized
deductions on past tax returns may find it worthwhile to do
so for 2010. Examples of when it may make sense to start
itemizing include a substantial decline in income, incurring
significant medical expenses, buying a home or losing a
Talk with a tax expert.
However diligent your research, the sprawling, ever-changing
tax code makes it easy to miss a meaningful tax break or
loophole. An investment in a savvy tax adviser or accountant
can pay for itself many times over by finding provisions that
might otherwise go overlooked.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.