10 Common Overlooked Tax Deductions

As you start getting your tax information together, don’t forget to look for tax deductions.

While it is mostly too late to rack up new tax deductions, you can go back through your expenses from last year and figure out if you are eligible for another deduction or two.  Every little bit helps when it comes to decreasing your tax liability.

If you are looking for a few more deductions to add to your tax return, here are 10 common overlooked tax deductions to consider:

1. Charitable Mileage

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Still Want a Deduction for Tax Year 2011? It’s Not Too Late

Now that 2012 is underway, many are concerned that it is too late to log more deductions for 2011.

For the most part, you’re out of luck: It’s too late to sell those losing investments for a deduction, or donate to a charity for a 2011 deduction.  December 31 has passed, and many of your chances to lower your taxable income have passed along with the old year.

However, it’s not too late to squeeze in a couple other tax deductions.

Indeed, you have the opportunity to find new tax deductions if you can contribute to a Health Savings Account or a traditional IRA.  You have until April 15 to make contributions to traditional IRAs and HSAs for the previous tax year (this year April 17th). Continue Reading

4 Ways to Save on Taxes with Mutual Funds

We normally think of mutual funds as investment vehicles—which they are—but they can also offer valuable ways to save money on income taxes this spring and beyond.

There are steps you can take with mutual funds right now that can lower your tax liability either for the 2011 tax year or, failing that, for 2012.  Yes, there are ways to save on taxes with mutual funds!

Some of these are time sensitive, so you’ll want to either make your moves now, or position yourself to be able to take advantage when tax time comes around next year.  The important thing is to move on this — the windows close quickly.

Municipal Bond Funds

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Investment Losses? Harvest them for a Tax Deduction

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No one likes to lose money on their investments.

However, in some cases, it is unavoidable.  If you are looking at some investment losers, though, you might consider how you can use them to your advantage.

Tax harvesting your losses allows you to get a deduction when you sell for less than you bought for.  As you get close to the end of the year, and you begin planning to maximize your tax deductions, consider how your investments losses can reduce your tax liability:

Offset Capital Gains

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Innocent Spouse Tax Relief Changes – New Rules

When you file a joint tax return, you are responsible, along with your spouse, for the information in the return.  If it turns out that your spouse under-reported his or her income, or claimed deductions or credits without being entitled to them, you might be liable for the resulting taxes, penalties and interest — just as your spouse is.

There are some instances in which you might find tax relief, however.  The IRS, with a new rules regarding innocent spouse tax relief, is making it a little easier to get free of your spouse’s tax debt.  If you want “equitable relief” there is no longer a two-year limit for applying.  And, if you have been turned down because of being outside this limit, you can reapply under the new rule.  But, in order to take advantage of this rule, you have to be an “innocent spouse.”Continue Reading

Paying Taxes with a Credit Card: Pros and Cons

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Are you thinking of paying taxes with a credit card?

The thought of clearing a debt with the IRS in one fell swoop is certainly appealing, and if your credit rating is not in good standing in order to obtain a bank loan, that credit card can sure look good.

But is using a credit card to pay taxes a wise decision?

Before we explore the pros and cons of paying taxes with a credit card, let’s examine paying taxes through an installment agreement with the IRS.

First things first, contacting the IRS and working out an installment agreement is one possible option to manage your debt.  Complete the IRS Installment Agreement Request Form 9465.  If you owe $25,000 or less this process can be completed online.  The IRS may allow you up to 60 months to pay your tax debt.  Within 30 days the IRS should let you know if your request has been approved and what you will be required to pay.
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What Are You Doing with Your Payroll Tax Cut?

At the end of last year, Congress hurried through a tax package.

One of the credits that was allowed to expire was the Making Work Pay tax credit.  However, our representatives replaced the Making Work Pay tax credit with a reduction in the payroll tax paid by employees. This means that you should be seeing a paycheck that is a little bit bigger.

Our leaders, of course, want you to go out and spend that money, pumping it back into the economy.  The whole point of tax cuts is to encourage you to spend so that we can keep the economy, which relies a great deal on consumer spending, moving in a direction of positive growth.  However tempting it might be to spend that extra money, though, it is a good idea to consider how that money can help you down the road.
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