Sunday, April 12, 2009

last minute thoughts before sending in your income tax returns

1. Always make sure you've matched and collected your 1098 and 1099-div/interest forms from your banks and other financial institutions. The IRS gets the same forms and if you've forgotten or missed one they'll find it via computer match and send you a letter requesting a correction.
2. Consider, if you can afford the change in free cash, an after tax IRA contribution, big earners, in 2010 will be able to convert these to roth IRA contributions without the previous earnings cap (which otherwise prohibits them).
3. Make sure you have letters or written receipts confirming your cash contributions to charities.
4. document your charitable contributions well. They can't exceed 50% of your income and contributions must be in good condition. I always create a spreadsheet detailing my contributions. information contained indicates: item, description, quantity, condition, estimated or actual market price (for new), and a link referring to a comparable item to justify the price itself. I also take photos of everything possible to prove they really exist. The charities I give to usually sign off on the sheet and give me a formal receipt.
5. If you're filing for an extension, try to estimate what you owe and send that payment with your extension, otherwise you will face penalties for a late payment.
6. Don't be afraid to use a tax professional if you have complex issues like multistate income, rental properties, family businesses and complex stock trades.
7. Always make sure you track post tax ira contributions in order to establish your cost basis - you'll need to have this documented in the future when you begin withdrawing money. You'll use form 8606.

Good luck. makingourway

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