Tax Return Tips for Last-Minute Filers
Ahh, it’s nearly the end of tax season, which brings memories of late-night runs to the post office and long waiting lines, back in the day of the paper return. This year, April 15th falls on a Monday, which for many means a dreary weekend before spent gathering files and parsing through pages for some last-minute tax savings.
If you’d rather curl up with a good book that weekend than slog through IRS forms and publications, here are some filing tips to get through yet another year of forms, figures, and phaseouts as quickly and painlessly as possible.
The first tip is, of course, to file early if you can do so. Having the extra time reduces stress and pressure in case you run into any problems. Also, if you are receiving a refund, it makes sense to try to gets those funds into your account sooner than later.
If you hire a return preparer, remember that this year’s tax season has been unusually hectic in light of the tax changes made in January’s Fiscal Cliff tax deal. Because the new tax law affected many lines on 2012 tax forms, the IRS generally delayed processing individual income tax returns until January 30th. Other forms were delayed until February and early March. The leaves preparers with less than the usual amount of time this year to beat the April 15th deadline.
Tax Breaks Reinstated Just in Time for Tax Season
Many expired tax perks and small business incentives were retroactively extended in Congress’ Fiscal Cliff deal earlier this year. In plain-speak, this means that you might be able to claim them this tax season on your 2012 tax return, even if back in 2012 it had looked like you would not be able to do so. Changes affecting 2012 business returns include:
- A higher expensing election annual limitation ($500,000) and annual investment limit ($2 million)
- A 15-year recovery period for certain leasehold, restaurant, and retail property
Also, the cost of updating and refurbishing certain retail, restaurant, or leased commercial property may be fully deductible on your 2012 return under expanded expensing rules.
Many business incentives were also extended beyond 2012, but only into 2013. Check with your advisor about what you can do this year, to increase your tax savings come tax time next year.
Other items reinstated for 2012 could help lower the tax due on your return. These include:
- The deduction for state and local sales taxes (instead of state and local income taxes)
- The deduction for mortgage insurance premiums as part of qualified residence interest
- The gross income exclusion for the discharge of qualified principal residence indebtedness of up to $2 million
- The above-the-line deduction for up to $4,000 of qualified tuition and related expenses
- The deduction for up to $250 of a primary or secondary educator’s out-of-pocket expenses
Save More, Pay Less, With a Last-Minute IRA Contribution
December 31st is generally the last chance you have to make changes that affect your 2012 income tax liability. However, that is not the case when it comes to IRA contributions. Contributions to a traditional or Roth IRA for 2012 may be made up until the April 15th deadline for filing your return.
IRA contributions for 2012 must be made by the original due date, not any extended due date, for filing your income tax return. This means that 2012 traditional or Roth IRA contributions must be made by April 15, 2013, even if you have an extension of time to file your return.
The maximum that you may contribute to a traditional IRA or Roth IRA for 2012 is $5,000 ($6,000 for those age 50 or older). If a married couple files jointly, the combined contributions of each spouse may be as much as $10,000 ($12,000 if both are age 50 or older).
Contributions to a traditional IRA that you designate for 2012 are generally deductible on your 2012 return. The ability to deduct the contribution depends on other factors such as whether you (or your spouse) were covered by another employer retirement plan, and your income and filing status.
Remember that income limitations affect your ability to make Roth IRA contributions. Also, contributions to a Roth IRA are not deductible.
Don’t Forget Your Estimated Taxes
While you’re working on your 2012 return, remember to stay on top of your 2013 estimated tax payment obligations. Estimated tax payments generally must be made if
- you expect to owe at least $1,000 in tax for 2013 and
- you expect your withholding and refundable credits to be less than 90 percent of your 2013 tax or 100 percent of your 2012 tax (110 percent, if your 2012 adjusted gross income exceeded $150,000).
Estimated taxes are generally due:
- April 15, 2013
- June 17, 2013
- Sept. 16, 2013
- Jan. 15, 2014
Starting in 2013, higher income taxpayers may have to pay a 3.8 percent tax on net investment income or a 0.9 percent Medicare surtax. This may tip the balance for some to increase their estimated tax payments this year.