Have you finished your taxes yet? They are due Apr. 18, 2011 this year. Avoid paying taxes, or reduce how much you owe, with these last minute tax tips that I summarized from Grant Thornton LLP, a firm headquartered in Chicago.
1. Boost your IRA. Get a deduction on your 2010 return even if you contribute to an Individual Retirement Account in 2011 – as late as Apr. 18, 2011. There is still time to open an IRA if you don’t have one. Contribution limits for 2010 are $5,000 or $6,000 if you are 50 and older.
2. Consider a Roth IRA. If you are not eligible to make a deductible IRA contribution, you may still be eligible to contribute to a Roth IRA. Adjusted gross income limits applicable to Roth IRAs can be significantly higher, particularly where both spouses work and are covered by other qualified retirement plans. A contribution to a Roth IRA will not get you a current tax deduction, but any future earnings will be exempt from tax.
3. Set up and contribute to an HSA. If you had a high deductible health insurance plan at any time in 2010, you might be eligible to set up a Health Savings Account (HSA) and make tax-deductible contributions for 2010 by Apr. 18, 2011. You can put in up to $6,150 for a family or $3,050 for individual coverage (plus a $1,000 extra if you are 55 or older).
4. Get your charitable house in order. Get paperwork for any charitable cash contributions. If you donate more than $500 in property, you must attach Form 8283. If you are claiming a deduction of $250 or more for a car donation, you will need a contemporaneous written acknowledgment from the charity that includes a description of the car.
5. Consider filing electronically. Filing electronically is the quickest way to get your refund and can save you from simple mistakes. Before the IRS accepts an electronic return, it checks for several critical errors. The IRS gives you the chance to correct the problems before it accepts and processes your electronic return.
6. Check your numbers twice. Avoid math errors and make sure to get your Social Security numbers right. If you write down an incorrect Social Security number for one of your dependents, the IRS will disallow the dependent, recalculate the return and usually send you a brand new tax bill. Not fun! Millions of returns also generate math error so go over your final numbers twice to get it right the first time.
7. Don’t miss the deadline for filing an extension. Don’t bury your head in the sand if you’re not going to get your return filed on time. File an automatic extension with Form 4868 instead of missing the deadline. An extension does not also extend the deadline to contribute to an IRA or HSA, and it does not extend the time for payment. By the filing deadline, you must have paid at least 90 percent of your 2010 tax bill or you will face penalties.