LAST-MINUTE TAX SAVERS

Here's how to sharpen your filing skills and get some of the deductions you're entitled to

You may be celebrating your safe passage to the new millennium, but it’s not smooth sailing until you file your 1999 tax return. The good news is that there are still ways to trim last year’s tax bill.

Dr. Michael E. Jones is looking for ways to do just that, and plans to contribute $2,000 to a traditional IRA. “I need the tax benefits,” says the 30-year-old New Yorker, an ear, nose and throat facial plastic surgery fellow. However, Jones’ tax advisor, Barrie Adedeji, CPA, isn’t so sure that’s the right move. “I like Roth IRAs, especially for young people,” she says. “Even though they’re nondeductible, they can provide years of tax-free buildup, followed by tax-free withdrawals.”

Just as Jones must weigh his options and choose what’s best for his fiscal health, so should you be aware that preparing your 1999 tax return is no easy lay-up: the best choice may not be the obvious one. Moreover, the steps you take now can have a major impact on your financial future.

Before you crunch even one number, though, your first step should be to polish your recordkeeping skills. Nothing can shave your tax bill-and protect you from IRS challenges-as effectively as good recordkeeping. If you weren’t diligent in 1999, start keeping track for 2000.

“As a real estate investor, every trash bag I buy is a deductible expense,” says Jones. “Over a full year, the amounts involved can be significant. I used to update my records sporadically, but now I do it regularly, using a software program from Quicken.”

Or you can manage your paper trail the low-tech way. “I use three-ring binders, and they work just fine,” says Brian G. Smith of Brian Smith Construction Inspection Inc. in Houston. “Separate binders help me keep track of business travel, business entertainment and so on. In addition, I use separate credit cards for business use and personal use, which makes it much easier to sort out deductible expenses.”

With your files in order, you’re ready to tame the tax beast. Whether you’re working with a preparer, filing online or pushing a pencil yourself, here are some of the major issues to consider this tax season and how they can translate to money-saving deductions.

IRAs
Most people can contribute up to $2,000 to an IRA for 1999, as long as the contribution is made by April 17, 2000. (April 15 falls on a Saturday this year.) Under some conditions, that contribution will be deductible. Jones, for example, can take the deduction because he’s not covered by an employer’s retirement plan. If you’re in an effective 35% tax bracket (including federal, state and local income taxes), a $2,000 deduction lightens your tax bill by a quick $700.

On the other hand, you get no deduction if you designate your IRA as a Roth IRA. So why do it? “If you leave the money in a Roth IRA for at least five years, until age 59 1/2, all the withdrawals will be tax free,” says Adedeji. Thus, you’re passing up several hundred

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