Paid your taxes yet? I haven’t. Here are some tips from The Minnesota Society of Certified Public Accountants (MNCPA).
Last minute tax preparation tips
MINNEAPOLIS â€“ Â In the last frantic hours before filing your 2010 taxes, donâ€™t get so frazzled that you forget about the deductions most frequently missed by taxpayers. It could mean more money in your pocket.
Itâ€™s easy to get wrapped up in the last minute rush to file, say tax experts at the Minnesota Society of Certified Public Accountants (MNCPA). Use the following information as a checklist to jog your memory and maximize your tax savings this year:
If you itemize your deductions, you may be able to deduct expenses you paid in 2010 for medical and dental care. You may deduct only the amount by which your total medical care expenses for the year exceed 7.5 percent of your adjusted gross income.
Ironically, even certain taxes can provide you with a tax deduction including: personal property taxes; real property taxes paid during the year; state and local income taxes paid or applied during the year, including wage withholding, or state and local sales taxes. Federal income, FICA and estate and gift taxes are not deductible.
The IRS divides interest into several categories. Personal interest such as that paid on car loans or credit cards is not deductible. Mortgage and investment interest expenses typically are deductible.
Casualty and theft losses
Casualty and theft losses can also be deductible. These deductions may include an automobile accident; loss of a bank account due to insolvency of the bank; fire, flood and storm damage; and the replacement cost of trees and shrubs damaged by storms or fires.
Contributions to qualified charities are generally fully deductible up to 50 percent of your AGI. (You can carry over any nondeductible excess for up to five years.)
Homebuyer Tax Credit
If you bought a home in 2010, you may be eligible for a homebuyer tax credit. First-time home buyers may be eligible for a credit of up to $8,000, though income limitations apply. Long-time home owners may be eligible for a credit of up to $6,500.
Miscellaneous itemized deductions generally are deductible when they exceed 2 percent of your AGI. These expenses add up, so donâ€™t forget to include accountants’ and tax preparation fees; costs for job-related uniforms; investment management and custody fees for taxable investments; job hunting expenses; and union and professional dues.
Paying your taxes
If you owe money to the IRS, it is very important to make your payment on time â€“ even if you ask for more time to file your actual return. If you do not pay on time, you will be subject to interest and penalties in addition to the amount you owe. Writing a check isnâ€™t your only payment option; taxpayers can make a payment by credit or debit card. You will incur a 2.5 percent convenience fee, but that will be a bargain when compared with the penalties and interest charged by the IRS.
Payments can be made by phone, Internet or when e-filing. Payments must be made electronically through tax preparation software, a tax professional or a card payment service provider via phone or Internet.
Check for errors
Before filing your return, review it carefully. According to the IRS, the most common errors are:
-Â Incorrect or missing social security numbers
-Â Incorrect tax entered based on taxable income and filing status
-Â Math errors
-Â Missing or incorrect identification numbers for child care providers
-Â Withholding and estimated tax payments entered on the wrong line
A CPA can help
The IRS website contains a section called Tax Topics, an indexed list of helpful information. But if you have questions, a CPA can help. The United Statesâ€™ tax code is very complex. No one wants to pay more taxes than they should, so individuals need to ensure they have the information they need to take advantage of the deductions for which they qualify.
Federal tax refund coming? MNCPA offers suggestions on what to do with it
MINNEAPOLIS (March 24, 2011) â€“ The Internal Revenue Service reports that 52 million Americans have already received a 2010 federal tax refund averaging $3,070. If your CPA determines that you will receive a refund, the Minnesota Society of Certified Public Accountants (MNCPA) members have some suggestions on what to do with it.
â€œYou went without the money all year long, why not invest in an IRA that can both increase your savings and reduce your income taxes,â€ says Todd Koch, a partner with John A. Knutson & Co.
â€œPay down your credit card debt,â€ recommends Scott Kadrlik, a managing partner with Meuwissen, Flygare, Kadrlik & Associates. â€œDo not spend foolishly because gas prices are unstable and you may need the refund dollars as the summer progresses.â€
â€œConsider adjusting your tax withholding,â€ adds Michael Niznik, a partner with Carlson Advisors. â€œYou may be better off to have more disposable income throughout the year rather than wait for a once-a-year-windfall.â€
To check on the status of your refund, download a phone app called IRS2Go. The free app can be downloaded at the Apple App Store (for iPhones) or the Android Marketplace (for Androids). Once downloaded, a tax filer simply enters a Social Security number (which is masked and encrypted for security purposes); their filing status; and the federal refund amount anticipated. For e-filers the refund function will work within 72 hours of an e-mail acknowledgement of tax return receipt. Paper filers will have to wait longer (up to four weeks) for a status report. The new phone app also offers daily tax tips to help with tax planning and preparation.
The Minnesota Society of Certified Public Accountants (MNCPA) serves the public interest by advancing the highest standards of ethics and practice within the CPA profession. MNCPA delivers on that promise by offering extensive continuing professional education and resources; advocating for members and the public with regulatory agencies and boards; and mentoring and encouraging the CPAs and business leaders of tomorrow. Founded in 1904, MNCPAâ€™s 9,400 members work in public accounting, business and industry, government and education. To locate a CPA, visit www.mncpa.org/referral.