We are getting near to tax filing deadline. For 2010 returns, the tax return deadline is April 18, 2011 since April 16th is Emancipation Day, and April 15th is declared a Legal Holiday in Washington DC. Here are some last minute reminders.
1. Remember to report all income. It is hard to defend the exclusion of income. Reconcile your 1099s and Form W-2 to your tax return.
2. If you have a business or rental property, carefully review all expenses that were ordinary and necessary for the production of income. Many people get sloppy and miss some of the smaller deductions. These missed deductions add up.
3. Look for deductions to charities and costs associated with charitable work. Charities are required to give you receipts for goods and services donated to them during the year. But some donations may not be the responsibility of the charity. For example, did you donate goods or services like driving the scouts to camp? You can deduct 14 cent a charitable mile. The tax court also said that hiring a babysitter while you performed charitable work is also deductible. The out of pocket costs for charitable costs and services add up to more deductions and that will keep more money in your pocket.
4. Can you make a contribution to an Individual Retirement Account (IRA)? If under 50 years of age at the end of 2010, you can contribute the smaller of $5,000 or taxable compensation for 2010. If over 50 years of age at the end of 2010, you may contribute up to the smaller of $6,000 or earned taxable compensation in 2010. The amount that you are allowed may be reduced depending on your Adjusted Gross Income (AGI) and you may be limited if you or your spouse is in a pension plan. The good news is that IRA contributions can be made up to April 18, 2011 and count as a 2010 deduction for income tax.
5. Do you have any tax credits that you can claim? Following is a list of credits to consider: earned income tax credit, Health coverage credits, child tax credit, child and dependent care credit, education credit, foreign tax credits. If you qualify for tax credits they may reduce your tax dollar for dollar.
6. If you inherited property and then sold at a gain, remember to step your cost basis up to the FMV at the date of death. This is often overlooked when preparing tax returns.
7. If you are a member of an LLC, did you incur any supplemental business expense that you did not submit for reimbursement? You may claim these expenses.
8. If you were out of work, remember to review all costs associated with job hunting and starting a new job. (resume writing, travel expense to interview for new position, and moving expense). For 2010, unemployment is also subject to tax.
9. Remember it is okay to take the deductions if you have substantial authority for the expense. Substantial authority includes visits to your rental property, paying kids in your business, and business convention expense in Hawaii or Bermuda. Know the tax rules and how to take advantage of lowering your income tax burden.
10. If you are in business don’t forget the new fast depreciation rules.
