Our valued sponsor

Last-Minute Tax Advice

If you’re a U.S. taxpayer, you don’t need to be reminded your filing deadline is April 15. Here are some pieces of advice while you scramble to get your return in order:

1. Avoid simple mishaps

A misplaced decimal point or a missing form can turn into a huge hassle if you’re not careful. Ernst & Young offers a few tips on avoiding mistakes. Among the suggestions:

• Check your math. Double check the numbers even if you’re using software.

• Write your Social Security number on every page of your return. If you write a check to the U.S. Treasury, write your SS number on the face of the check, along with your form number and the tax year.

[uPDATE: A spokeswoman points out these tips come from the Ernst & Young Tax Guide 2010.]

2. If you’re running out of time…

You can file for an extension by April 15, which will allow you to delay your return until Oct. 15. Former BusinessWeek colleague Lauren Young, writing for TurboTax, offers some good tips, notably:

• An extension doesn’t mean you can delay your tax payment. You need to estimate your 2009 tax bill and pay up. If you’re wrong and underpay by more than 10%, the IRS will penalize you.

• Don’t forget that a federal tax extension doesn’t necessarily give you a state extension.

Lauren answers several other common questions — including about various tax credits and other ways to lower your tax bill — here.

3. Think about this year’s taxes.

You might be exhausted from 2009 taxes, but this is also a great time to find ways to lower your tax bill in 2010 or future years.

One way to do so is through Roth Conversions. In 2010, for the first time, taxpayers with incomes over $100,000 will be able to convert holdings from a traditional individual retirement account to a Roth IRA. This requires a higher tax bill in the short term, but for many investors it could lower their lifetime tax burden.

Remember: You pay no taxes on money that goes into a traditional IRA. However, you do pay taxes on money that’s withdrawn from an IRA. A Roth IRA is the opposite. You pay taxes on whatever income goes into a Roth IRA, but the money that comes out of it — after you retire and after the holdings have (hopefully) appreciated — is tax free.

Wealth advisors at Robert W. Baird offer helpful information on 2010 Roth conversions here and here.

Latest Threads