While it’s prudent to engage in tax planning throughout the year, here are some tips, tools, and advice to guide you through last-minute filing.
Credits and Exemptions Taxpayers can deduct more for each exemption this year. The amount has increased from $3,200 to $3,300 per exemption. If your adjusted gross income is above a certain level ($150,500 for single filers and $225,750 for married persons filing jointly), the amount may be lower.
If you purchased an alternative motor vehicle such as a hybrid car last year, you may be eligible for a tax credit. The credit amount depends on the type of car you bought and the date you purchased it, says James Lange, author of Retire Secure! Pay Taxes Later: The Key to Making Your Money Last as Long as You Do (Wiley; $24.95). The credit is highest if you bought the car before Sept. 30.
Reporting Requirements Those who claim charitable deductions beware: the IRS has become more stringent with its reporting requirements. If you make a monetary contribution, the IRS now requires a bank record, a canceled check, or credit card statement in addition to a letter from the charity, says Lange.
Refund Management Getting a refund? Now it’s easier than ever to make sure you save it prudently. For the first time, taxpayers can have their refund split and sent via direct deposit to up to three different accounts at banks, credit unions, brokerage firms, or mutual funds. To utilize this option, download and complete Form 8888 (www.irs.gov/pub/irs-pdf/f8888.pdf).
Tools Intuit’s new Home & Business Schedule C ($74.95) is geared toward the small-business owner. “We’ve customized it for different types of businesses,” says Julie Miller, a spokeswoman for Intuit, so a real estate agent, for example, would be guided by industry-specific data. In addition to its Basic ($14.95) and Deluxe Deduction Maximizer ($29.95) programs, Intuit also offers Premier Investments ($49.95), which is designed for taxpayers that own stocks and rental property. All of the programs are available at http://turbotax.intuit.com.
H&R Block took a different approach with its TaxCut program. Rather than offering different versions of the software as in years past, “everybody gets the premium product,” says spokeswoman Denise Sposato. For $19.95 ($29.95 including the state product), users get software that adjusts itself automatically to the questions answered so they’re not forced to scroll through tax scenarios that are irrelevant to them. For more information, go to www.taxcut.com.