Five Tips to Tackle Your 2010 Tax Bill
by Dec 29th 2010 9:00AM
Besides making the most of your flexible spending account and taking advantage of changes with the Roth IRA, here are five things to keep in mind when figuring out your 2010 tax bill.No More Forms By Mail
For the first time, the IRS is not mailing paper returns. If you want to file paper returns, you're going to have to download the forms and schedules from the IRS website yourself. After all, said J.K. Lasser Institute's Barbara Weltman, more than 35% of all 2009 tax returns were filed from home computers.
Make the Most of Credits, Deductions and Exemptions
Tame your tax bill by taking advantage where you can. For example, if you installed new insulation, a furnace, windows or anything that makes your home more energy efficient before the end of the year, you may qualify for up to $1,500 in home energy efficiency tax credits, says Bob Meighan, a CPA and vice president of TurboxTax.
There are also higher credit amounts for adoption, higher exemption amounts for the alternative minimum tax and higher standard deduction for heads of households.
Optimize New Tax Breaks
Weltman says that unlike last year, there is no phase-out of personal exemptions and itemized deductions for high-income taxpayers. And for the self-employed who buy their own health insurance, in 2010, they can not only continue to deduct it as a personal expense, they can also use it to reduce their net earnings from self-employment for the purpose of the self-employment tax.
Re-evaluate Your Tax Withholding
According to Meighan of TurboTax, almost 80% of all filers got a refund of about $3,000, so if you're one of them, he recommends that "you may want to adjust your payroll withholding for 2011 so you're getting more take home pay on a regular basis."
If you're going to maximize your write-offs, you may need to attach more documents than last year. For example, says Weltman, if you claim the adoption credit, you will need to submit to the IRS a copy of the adoption decree or order for domestic adoptions and, where applicable, certification of a special needs child. Foreign adoptions require the child's Hague Adoption Certificate, an IH-3 visa, or a foreign adoption decree translated into English. If the child's country of origin is not a party to the Hague Convention, then attach a copy of the translated decree or an IR-2 or IR-3 visa.
Claiming the first-time home-buyer credit? Be prepared to submit the HUD-1 settlement statement.
"Every little deduction, credit, and other tax break you can claim adds up to big tax savings, enabling you to keep more of what you earn," Weltman says.