Last Minute Tax Tips

The government remains open for business, and your taxes are due soon.  This year it is delayed a little bit, to April 18^th.  (One more weekend of going to the office for me!) So there is a little time to do some last minute “planning” -- or should we say remediation -- presumably last-minute and planning can’t really be combined. 

First off – while it’s too late for the Roth conversion deal (two years to pay the tax liability if you converted a traditional IRA to a Roth before 12/31/10) you can still take a 2010 deduction by contributing to a traditional IRA by the 18^th.  The same holds true for contributing funds to a qualified Health Savings Account ($6,150 for family, $3,050 for individuals). 

Another good reminder is to make sure you’ve got all your charitable donations noted.  If you give via payroll deduction, you don’t get a letter, but you can count the donation as an offset to your taxable income.

Not to encourage marital strife, but it’s worth checking to make sure filing jointly is the best plan.  One example where this might work is if one spouse has fairly big medical bills, but the couple’s combined income makes the threshold for getting the medical deduction out of reach.  This is not a one-variable decision, so you need to see the final difference on the return before you make a change.  Still – it’s worth checking.

Finally, this little nugget from the GAO in their report to Congress on how the IRS is doing this year.  While avoiding a shut down, apparently the IRS is hampered by restrictions on checking for mathematical errors on returns, unless they do a full audit.  According to the report, if the IRS doesn’t have the permission in the existing 13 Math Error Authority designations, they can’t check for a mistake (or fraud) unless the return gets audited.  An example cited in the report is for the Residential Energy Credit, which this year had a lifetime cap put on of $1,500.  I checked a number of returns this season to make sure the limit wasn’t exceeded.  Apparently the IRS won’t be doing the same.   It’s awkward to advocate for tax compliance when the government doesn’t even pretend that enforcement is consistent.    (Oops, more late tax season crankiness!  Good thing we’re almost done.)