Tax Planning at the Midnight Hour: 7 Tips to Help Your Clients Beat the Deadline
April 10, 2011 12:00 AM
7. Dont Miss the Deadline for Filing an Extension
7. Dont Miss the Deadline for Filing an Extension
Dont allows your clients to bury their heads in the sand if theyre not going to get their return filed on time. Filing for an automatic extension with Form 4868 is painless and will spare penalties for missing the deadline. But remember, extending the filing deadline does not extend the time for making a contribution to an IRA or HSA, and it does not extend the time for payment. By the filing deadline, your clients must have paid at least 90% of their 2010 tax liability through withholding, estimated payments and any payment made with their extension.
6. Check the Numbers Twice
6. Check the Numbers Twice
Avoid math errors and make sure your clients get their Social Security numbers right. IRS computers automatically match all Social Security numbers and check for simple math mistakes. If your client wrote down the wrong Social Security number for one of their dependents, the IRS will disallow the dependent, recalculate the return and usually send a brand new tax bill. Millions of returns also generate math error notices that often come as unwelcome surprises to unsuspecting taxpayers. These problems can be a hassle to unwind.
5. Consider Filing Electronically
5. Consider Filing Electronically
Filing electronically will speed up your clients refund and can save them from simple mistakes. Before the IRS accepts an electronic return, it checks for several critical errors. The IRS gives individuals the chance to correct the problems before it accepts and processes your electronic return. The IRS has also indicated that it will not process paper returns during a government shutdown, potentially delaying refunds if Congress is not able to agree on a budget.
4. Get Your Clients Charitable House in Order
4. Get Your Clients Charitable House in Order
A charitable cash contribution must be documented to be deductible. If your client claims a charitable deduction of over $500 in donated property, they must attach Form 8283. If they are claiming a deduction of $250 or more for a car donation, they will need a contemporaneous written acknowledgement from the charity that includes a description of the car. Remember, they cannot deduct donations to individuals, social clubs, political groups or foreign organizations.
3. Set Up and Contribute to an HSA
3. Set Up and Contribute to an HSA
If your client was covered by a high deductible health insurance plan at any time in 2010, they are likely still eligible to set up a Health Savings Account (HSA) and make tax-deductible contributions for 2010 by April 18. Theyre allowed to contribute up to $6,150 for a family or $3,050 for individual coverage (plus a $1,000 catch-up contribution for those 55 or older). High deductible health plans require users to pay for their health care costs out-of-pocket until they reach a deductible where their insurance kicks in, while protecting against catastrophic medical bills with an out-of-pocket maximum.
2. Consider a Roth IRA
2. Consider a Roth IRA
If your client is not eligible to make a deductible IRA contribution, see if they are eligible to contribute to a Roth IRA. AGI limits applicable to Roth IRAs can be significantly higher, particularly where both spouses work and are covered by other qualified retirement plans. A contribution to a Roth IRA will not get your client a current tax deduction, but any future earnings will be exempt from tax.
1. Contribute to an IRA
1. Contribute to an IRA
Your clients can still get an above-the-line deduction for their 2010 return by contributing to an Individual Retirement Account now. They can make contributions that are deductible on their 2010 return any time before April 18 and can even set up the account now if they dont have one already. Contribution limits for 2010 are $5,000 plus a $1,000 catch-up for those 50 and over. Whether the contribution will be deductible depends on whether your client and/or their spouse participate in other qualified retirement plans, and on their adjusted gross income (AGI).
Tax Planning at the Midnight Hour: 7 Tips to Help Your Clients Beat the Deadline
With the April 18 tax filing deadline fast approaching, Grant Thornton wants to assure American taxpayers that theres no need to panic.
A lot of people dont want to think about taxes until they absolutely cant avoid it, but dont bury your head in the sand, said Mel Schwarz, a partner at Grant Thornton. There are plenty of things you can do to beat the upcoming deadline and even some last-minute strategies you can use to affect your 2010 return.
Check out seven last-minute tax tips for your clients that may be procrastinating and need some help.
