TIP: Last Minute Tax Tips
There is still time to do a review with your tax professional to make sure you are maximizing all your options for cutting your 2008 tax bill. There’s absolutely no time to waste—so here are some 11th hour tips and reminders for procrastinators.
- If you are a self-employed single practitioner, you still have time to set up a retirement plan to generate tax write-offs. A simplified employee pension (SEP) can be set up now and generate tax deductions on your 2008 tax filing. Note: If you are not a single practitioner firm and have employees, a SEP still might be a viable option. However, this changes things significantly. It is likely that you would be required to set up SEP accounts for, and make contributions to, employee SEP accounts, thus wiping out any possible personal tax advantages.
- It might be possible to “erase” part of your tax liabilities, if you reverse a 2008 Roth conversion. You might realize tax benefits from a reversal if you took money out of a traditional IRA in 2008 to put into a Roth IRA. This set you up to pay taxes on the money you withdrew prior to placing it in a Roth plan. This investment strategy might have made excellent sense prior to the stock market slump but now it looks like a costly example of lousy timing. You can recoup a little by reversing the conversion back to a traditional IRA. This wipes out the initial tax bill associated with the initial conversion.
- Get any receipts you have for charitable donations in order now. Remember that since 2007, the rules for charitable contributions are more stringent. You must submit bank records or receipts for cash donations to eligible non-profit organizations with your returns.
- Do your FICA payments exceed the maximum required? You owe only FICA taxes for wages up to $97,500.00, but if you hold two jobs it is easy to forget the ceiling and over-pay. If your FICA taxes exceed the limit, you can use the credit to pay the income taxes you owe.
- Individual tax payers are entitled to an automatic six-month extension to file their individual returns. Don’t forget that the extension involves the paperwork only and not your check. The due date for payment of taxes does not change, and you must send an amount reflecting your best estimate of what’s owed with IRS form 4868. If you don’t, the IRS will impose penalties and interest on the money due by April 15, 2009.