Now that the April 15th deadline is behind us, the best personal finance advice you can take is to start planning for your 2010 Income Taxes now. That way, you will be ready to take advantage of all the 2010 tax tricks, tips and deductions you can.

Sure, last minute tax advice and finding those hidden tax deductions during crunch time is great, but to really save money on taxes, you have to plan all year long. Start watching now for expenses that you can deduct from your taxes and start keeping records and receipts for all of those possible tax deductions that might be usable to lower your taxes if you meet certain requirements or minimum thresholds. Most importantly, start keeping your contemporaneous records of important deductible expenses like business mileage, unreimbursed expenses, training and education expenses, and medical expenses.

IRS 2010 Standard Mileage Deduction Rate

The standard mileage rate for 2010 is 50 cents per mile for business reasons. The 2010 standard mileage rate for miles driven for charitable purposes is 14 cents per mile.

You can deduct all unreimbursed mileage driven for business reasons and most charitable reasons as long as you have written documentation of the miles driven. These records must be "contemporaneous," which basically means that you need to create the record as it happens. In other words, you need to be recording your mileage in a little mileage log book every time you drive somewhere. Creating a log at the end of the year won’t cut it.

There is no need to buy a mileage log specifically, however, many people find it useful to have the format for recording their business trips in place. It can also make filling in the data easier. Most importantly, by completely filling out one of the mileage logs that you get at an office supply store like Office Depot or Staples is that you can be sure that you are writing down all the information that is required to take the standard business mileage rate for 2010 deduction from your taxes. Otherwise, any notebook will do. Write down your starting and ending mileage (use the main odometer reading, not just the trip odometer) and the total miles. Be sure to note whether that is one-way or round trip. Also note what the business reason was for making the trip.

Whether you waited until the last minute or filed months ago, there is one last 2009 tax tips and tricks that you need to follow. Print out a copy of your tax return from your TurboTax software or print out your taxes from your TaxCut software, or whatever other tax software program you used to file your Federal Income Taxes.

Many people have the misconception that the TurboTax file saved on their computer as they worked on their Income Taxes is a regular file that can be opened and printed with a regular software program like Microsoft Word or Adobe Acrobat Reader. Unfortunately, that is not the case. The files generated by popular tax preparation programs like TurboTax and TaxCut is a proprietary file that can only be opened in the tax program. While next year’s version of the program will most likely be able to open that tax file, you have to buy it first. That isn’t very helpful if you need to produce a copy of your taxes in September to get a small business loan or open up a bank account.

There are ways to hack open TurboTax files, but why go through all that trouble?

Print Your TurboTax Files Now

While your tax program is still installed on your computer hard drive, run the program and click on the File Print Save section. I recommend printing out a hard copy of the actual forms submitted to the IRS as part of your income tax filing. That includes the Form 1040, Schedule A, Schedule D, and so on.

Most programs allow you to select how much you want to print, ranging from print only the official IRS form filed or e-filed, all the way to print everything, including all worksheets. Just print the filed forms. You won’t need all that other stuff unless you get audited.

However, you might want some of those numbers later on, and re-calculating them is a waste of time. Instead, use the program’s save function to save out one of the "all worksheets, all forms" options as a PDF file. That way, you can open and read that file whenever you want, even if the tax software has been uninstalled from your computer.

Which brings up one final point. By default, TurboTax saves your personal tax information files in the TurboTax directory. Normally, that isn’t an issue, but if the day comes when you are looking to delete some files from your computer, or choosing which files to backup or move to a new computer, you might think that the TurboTax folder is just the program’s files. In that case, you might assume you don’t need them anymore!

Go ahead and copy both your program’s data file, the TurboTax file, AND the PDF file that you saved out as instructed above to another folder. Name this folder something like Taxes 2009, and you can be sure that when you see that folder five or six months for now that you will probably be thinking, "Oh, those are my taxes. I better make sure and save those."

Get ready to start saving money on taxes in 2010! But, first, go out and relax a bit. You’ve earned it.

Here comes tax time for that huge group of Americans who wait until the proverbial last minute to file their income taxes. For them, crunch time is approaching and they need to find all of those tax receipts and records that they will need in order to file Federal Income Taxes. Fortunately, one of the best tax tricks for 2010 is getting free tax preparation software. The best part is that there is no real downside as long as you are smart and keep an eye out for optional add-ons, upgrades, and online tax filing options that might shatter your free tax software deals.

Many of the deals websites out there (check out Slickdeals.net and Gottadeal.com as well as Dealnews.com for starters) will notify you when companies like Intuit offer free online TurboTax applications for users who show up within a certain time frame. The HR Block guys similarly offer free TaxCut software signups from time to time.

If you are wondering what the catch is, because obviously these companies can’t make money by giving their programs away online, then good for you. The first step to avoid being a sucker who gets scammed is to be aware of what makes sense, what motivates people and companies, and trying to see the find print.

In this case, the fine print comes in the form of add-on offers. Depending on which deal on tax software you get, it might be free to input all the data and print the return, but there is a charge to e-file. Another strategy is to offer free Federal Income Tax preparation and free e-file, but to charge for doing your state income tax return. Unless you live in New York, California, or another state with complicated state income taxes, chances are your state return is pretty easy to do by yourself. Of course, there is always the “subscription” trap, where you think you are getting something for free, but are actually signing up for a $99.95 annual subscription to something. Just make sure you don’t enter a credit card number and you should be OK.

These sites also require registration and while these are legitimate companies that don’t benefit from spam or overly aggressive marketing, you can be sure they’ll be in touch sooner or later.

In Colorado, for example, the State of Colorado offers every resident free online e-filing of their state income taxes. For 90% of residents, all that you need to do is plug in a handful of numbers from your completed IRS Form 1040 tax return (they even tell you which line numbers to use) and then hit submit. (There is more to it for certain circumstances like partial-year residents, land income, and so on.) In other words, you would be a fool to buy TurboTax State edition if you live in Colorado.

If you don’t want to watch the deal websites (which is really the easiest way) you can also pop onto the main product webpages at turbotax.com and taxcut.com and see if they are running a public deal. However, you might have to dig around a little bit. After all, these companies don’t want to offer free software to someone who is coming there to buy it!

More personal finance tips and advice

Finance Investing Banking Information and Eduction

When it’s tax season, everyone’s thoughts turn to tax deductions. Financial advisors and accountants alike are flooded with calls from frantic clients looking to save money on taxes by finding new deductions or other 2009 tax tricks. The most common question by far is, “Is this Deductible?”

Unfortunately, many tax deductions are either too small to have very much impact on how much taxes you pay, or are too narrowly tailored to actually be a tax deduction that most people can take. Add into the mix the fact that many of the things that people “just know” are tax deductible, actually are not tax deductions until they are higher than a certain “floor”, and most searches for new tax deductible items end in dissapointment.

The good news is that some big items are deductible for almost everyone. These are the best tax deductions out there and they are good for high-income taxpayers and lower-income taxpayers alike. These include deducting mortgage interest, many educational expenses, and tax deductions for children, and the related child tax credit. One of the other biggies that can bring tax burden relief is deductible property taxes.

Deducting Property Taxes on Income Tax Forms

Many people are surprised to find out how much property taxes they pay on real estate, particularly on their primary residence. This is because a large percentage of home owners pay their property taxes via their mortgage loan.

That is, that the mortgage company collects an extra amount of money with each payment which it keeps in an escrow account. Over the year, that extra money adds up to enough cash to cover the amount of property taxes due. If it the escrow account comes up short, the mortgage company fronts the money and then increases the part of the monthly loan payment for escrow.

Even though the mortgage company handles paying the property taxes for you, it does so with your money, which means you are the still the one who paid the property taxes, and therefore, you are the one who gets the property tax deduction. Check the 1099-INT tax form the mortgage company is required to send you each year. Both the amount of mortgage interest paid for the year and the amount of property taxes paid annually should be listed.

Don’t forget about other property taxes too! The most common type of property taxes that are deductible, other than real estate property taxes, are the property taxes on cars. Automobile property taxes are deductible if they are computed based upon a percentage of the car’s value. In other words, the taxes that are levied by the state, county, or city that are a variable amount depending on how much the car is worth are deductible. Flat taxes and fees, such as a $25 annual fee,  that are the same amount no matter what the car is worth are not deductible.

Keep an eye on the mail for all tax forms, including 1099 Forms for real estate and brokerage and banking accounts. There are important tax numbers on each of these.

There is an unfortunate amount of confusion surrounding the concept of the Federal Tax Identification Number. It is ironic, because the whole Tax ID, FEIN, and EIN thing is actually very simple, mostly because they are generally all the same thing. However, it isn’t surprising that this concept confused many personal finance students because when it comes to things like laws and taxes, tiny variations in terms usually mean very different things.

What is a Tax ID Number?

Tax ID Number, or Tax Identification Number, and the like, all refer to the same thing. When taxes are filed, whether they are personal income taxes, or business income taxes, there must be a unique identifier used on the tax return. Likewise, if income is reported, that income must be reported to the IRS with a unique number identifying who it was paid to.

In the case of Federal Income Taxes, the tax ID number is a Social Security Number. However, businesses do not have SSN, so they need a different unique number to use for identification purposes on tax documents.

FEIN stands for Federal Employer Identification Number. It’s “brother” is the EIN which stands for Employer Identification Number.

What Is The Difference Between an EIN and a FEIN?

Let’s start with the easiest part of the tax number concept to understand. There is no difference between a FEIN and a EIN.

To be more technically correct, there is no such thing as a FEIN. While there may be State based employer identification numbers, the Federal Government makes no allowance for them in its official terminology or within the tax code. Thus, if someone is talking about Federal and state tax ID numbers, then they are technically discussing Employer Identification Numbers (EIN) and State Employer Identification Numbers. In other words, there is no “Federal” label for official purposes.

The arbiter of all taxable information and tax numbers is the Internal Revenue Service. No one else counts when it comes to Federal Income Taxes. It is not surprising then, that the IRS is who issues EINs or Federal Tax Identification Numbers.

Do I Need an EIN (Employer Identification Number)?

For many entrepreneurs, their small business is a separate legal entity. Such a business structure limits personal liability for business owners, whether it is via a S Corp, Limited Liability Partnership (LLP), or Limited Liability Company (LLC). In some cases, a business tax ID number is required. In others, it can be optional.

The thing that throws most people and generates plenty of questions for those who provide personal financial advice and tips, is the word “employer.” Many entrepreneurs have small businesses which have no employees, or only family members as employees. Thus, the inevitable question is whether or not such a business requires an EIN.

Despite the name, an EIN is merely an identification number used for tax purposes. While only businesses with employees are required to get an EIN, businesses without employees can use them as well.

In fact, every small business owner should get an EIN tax ID number whether they have any employees or not. This is not only good business practice, it is also very necessary in order to protect privacy and prevent identity theft.

Whenever a business pays more than $400 in a calendar year to a business, whether a small business or otherwise, they are required to report that payment to the IRS. To do so, they must file an IRS form that, not surprisingly, requires the recipient’s tax ID number to be listed. As a small business owner, you have two choices:

1. Use Your Own Social Security Number
2. Use a Tax ID Number or EIN

It shouldn’t be rocket science why you don’t want to be handing your SSN out all over the place. Obviously, if your business is a small sideline thing and you only do work for people you know and trust, or well-known reliable companies, then the risks are lower. However, the fewer places you can give out your social as you go through life, the better.

As the end of the year races toward us, the opportunities to find and take advantage of tax deductions and loopholes to save money on income taxes are growing scarce. Fortunately, there are still plenty of tax saving strategies that you can implement even with just a few weeks to go until the end of the tax year.

One of the most effective ways for typical households to lower their tax bill is by donating items to charities. Unlike cash donations, donating used goods to charity is a free way to reduce the income taxes you pay. A quick trip to the basement or storage closet could turn up several trash bags worth of used clothing that no longer fits your children, or you. Other items like shirts, pants, suits, jackets, shoes and more may just be out of style, or no longer fit your current dressing manner.

For example, workers who used to have to wear a suit and tie to the office may now work in a business casual environment. Unless you live on the East Coast, suit and tie occasions don’t come up all that often. Hold onto one dark suite for funerals and formal weddings, and one less formal suit for other semi-formal events. Even clinging onto one fun suit, or stylish suit that you "might" wear to "something" someday can still leave you with a dozen suits that can be donated to local charities. Keep track of everything you donate with "contemporaneous records." Take the receipt from the charity and fill it out right away, but also keep a log in a notebook or a note card of everything you donate.

If you haven’t cleaned out your basement or storage unit in the last few years, there might be TONS of used clothing in there that you can donate. Don’t be afraid to donate it all and claim every last penny on your income taxes. Again, just keep very good records of exactly what you donated and when. Back up the charity’s receipt with your own logs, and, for extra measure, take some digital photos of the clothing. There is no need to capture itemized pictures, a few pics of a giant clothing pile and maybe one or two of the twenty bags being dropped off at Goodwill should be more than enough proof to head off any challenge regarding how much you donated. (How much you valued each item at, is a different story, which will cover next year when we talk about how to prepare your 2009 Federal Income Taxes.)

Don’t stop at clothing. Small appliances (think anything that could be used in a dorm room or small apartment), electronics, sporting goods, and more can all be donated to charities that would gladly accept them.

As an added tip, break up your donations by dropping them off over several days, or donating a portion of your used goods to various different charities. The IRS requires additional documentation for single donations that exceed $400. Keep each donation under that amount, and relive the extra burden of documenting larger charitable donations.

With many charities having one of their worst year ever raising money for good causes, now is the time to pitch in and help out. By donating unwanted items that are laying around your house, you not only help good causes that you believe in, you can also make some money and save on your taxes next year at the same time. Plus, you house will be cleaner, and you might actually be able to find some of those important things that are lost in your storage areas.

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Updated Information for 2010 179 Deduction Limits for Small Business Taxes has been published.

Business tax deductions are important in order to offset high business taxes levied against small business owners and entrepreneurs. Business owners, particularly, single proprietors are often hit with high tax bills because of the Self Employment Taxes.

Self-employment taxes, or SE Tax, is so high because it includes taxes that would usually be paid by the employer. As an entrepreneur, the small business owner gets a double taxation whammy on things like Social Security taxes. The standard worker with a wage paying job at an employer pays 7.5% in Social Security Taxes. The employer withholds this amount from the employee’s paycheck. The employer also pays 7.5% in SS taxes.

The total Social Security Taxes adds up to a whopping 15%. A small business owner that files as a sole-proprietor is on the hook for the whole thing! That means that an entrepreneur pays 15% in taxes for Social Security on top of the regular Federal Income Taxes that they owe. For a successful small business owner with a high-income that puts him in the 30% tax bracket, that adds up to an astounding 45% Income Tax rate. And, that is before things like Medicare taxes, state taxes, and local taxes.

In other words, a small business owner can pay 50% or more very easily in taxes!

The only defense against such barbaric tax-rates is to take as many business tax deductions as possible. By doing so, the business lowers its profit for tax purposes, and therefore passes along less income to the taxpaying business owner on his Schedule C – Profit and Loss From Business Operations.

As an aside, this financial dance with the IRS is what causes legitimate, successful business owners to have trouble qualifying for mortgages or other loans. By the time these deductions are all taken, the income the business appears to earn can be substantially lower than its actual profits as they apply to the business owner’s bank account. This is why stated-income mortgages are so important for the self-employed. Unfortunately, scumbag mortgage brokers uses these mortgages to get unqualified borrowers into mortgages for houses that they couldn’t afford. These days, stated-income mortgages are all but dead thanks to these crooks.

Unfortunately, racking up sizable tax deductions by buying office supplies like paper, toner, and ink cartridges is difficult, even when paying the criminally overpriced rate for brand name printer ink and toner.

2009 Section 179 Limits Business Tax Deduction

The savior for many small business owners is IRS Section 179. Section 179 allows for a certain amount of business expenses to be deducted immediately, instead of depreciated over several years. This is particularly useful for out of date tax depreciation limits like those on computers. Imagine how laughable it is to deduct a netbook purchase over five years. Odds are a netbook will not last 5-years. Even better odds are that it won’t be "useful" in 5-years regardless of the what the IRS says.

With a Section 179 deduction, the small business owner deducts $200 in the year the netbook was purchased, instead of deducting $40 per year for five years.

Maximizing Section 179 Tax Deductions is a critical personal finance skill for any entrepreneur. Keep an eye here for more information on income tax deductions and paying Federal Income Taxes in the near future.

A great tax saving strategy, particularly for higher-income taxpayers is to start a small business. Many expenses that are not deductible for regular Federal Income Taxes are deductible to a business. For example, the mileage deduction is not deductible for personal driving purposes, and mileage driving to work is also not deductible. However, mileage driven for business purposes is tax deductible.

While starting a phony small business is not a good idea, no matter how big of tax savings can be achieved, there are many legitimate businesses that people can start. The key aspect of being legally considered a business for tax purposes is that there must be a profit motive to the activity. That profit motive must outweigh other reasons for engaging in the activity, otherwise, the enterprise could be considered a hobby instead of a business.

Formally incorporate the business with the Secretary of State in your state. Set up a LLC, it makes a great business structure for single-owner small businesses and is typically cheap and easy to setup. Filling out an online form and paying a registration fee is usually all that is required.

Then, get an Employee Identification Number, or EIN from the IRS. Unofficially known as FEIN by some people, an EIN is free and can be applied for and issued instantly online.

These steps go a long way toward legitimizing your business. Make sure you report a little bit of income along the way (verifiable income that comes with a 1099 is best) and your business can save you lots of money on taxes over the years.

(Finance Gourmet has no affiliation with MortageCalculatorium – They are stealing our RSS Feed – Come to the real personal finance advice site)

Small Business Tax Deductions That Regular Filers Can’t Get

With a small business, that trip to Office Depot is tax deductible. A business also makes it so you can deduct buying new computer equipment like monitors, printers, desks, chairs, and other office furniture. You can also deduct office supplies. All you have to do to save hundreds of dollars on your taxes is keep a mileage log for business purposes, and save those receipts for everything you purchase for the business.

When you file taxes for a LLC make sure to distinguish between office supplies like paper, toner, ink cartridges, coffee, notebooks, calculators, and so on, from capital expenditures. The difference lies in the usable life of the office equipment or office supply. Most consumables are considered office supplies, while items with a usable lifespan of years are considered equipment or capital.

The importance of this difference is that office supplies are straight tax deductible, while equipment or other capital expenditures may need to be depreciated. The definition of depreciation is that the amount deducted is equal to the amount of usable life that has been used up during the tax year. Since there is a lot of room for interpretation there, the IRS has formal depreciation tables and rules that state how long certain classifications of equipment must be deducted over. For example, if an item must be depreciated over 5 years, then the business can deduct one-fifth (1/5th) of the purchase price of the item in the first year, and then 1/5th, or 20% of the price in each of the four following years.

It is typically in the business’ best interest to deduct items as quickly as possible. Fortunately, small businesses can take advantage of a special tax provision for entrepreneurs and other small business owners.

2009 Section 179 Limit

Businesses may deduct the full cost of some items regardless of the usual taxable deprecation schedule as Section 179 Expenses. The Section 179 limits for 2009 is $250,000. That means that a business can deduct up to $250,000 worth of anything without having to depreciate it over the normal lifespan of the item. For high-income taxpayers, this offers a big tax deduction if used properly.

Section 179 Limits 2009 Vehicles

Deducting the cost of an automobile has been a favorite tax deduction for tax payers with high incomes. However, the total depreciation deduction for a passenger automobile placed in service during 2009 is $2,960, or $10,960 for automobiles that qualify for the special depreciation allowance.

The maximum deduction for a truck or van is $3,060 or $11,060 for those that qualify for the special depreciation allowance.

The old tax loophole for buying a Hummer, Suburban, or other heavy vehicle to get a bigger Federal Income Tax deduction has been largely closed.

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Ah, November, when the American mind turns toward Thanksgiving, Christmas shopping, and strategies to avoid paying too much taxes for 2009. Yes, you should be doing tax planning year round to achieve the maximum savings on taxes, but reality isn’t always so kind. Still, there are some end of year tax moves that are smart and some that just aren’t worthwhile tax strategies when you add up your tax savings. Figuring out which is which is a critical part of personal finance.

To avoid making tax moves that aren’t worth the trouble, there is a simple strategy.

Always calculate the real dollar amount of any tax strategy prior to implementation.

Tax Savings Strategy Example #1:

The Top 10 End of Year Tax Strategy Tips lists always include the barely usable advice to pay your January mortgage early. By paying your January mortgage bill in December, you get to deduct the interest from your payment in 2009.

There is a big, fat catch, however. Although you do get to deduct 13 months worth of mortgage interest in 2009, you will only get to deduct 11 months worth of interest in 2010 unless you make sure to make that January payment in December again next year. This will be true until you finally bite the bullet and take just 11 months worth of deductions, or you pay off your mortgage. Is it worth it? Maybe.

Calculate the real dollar amount of tax savings from paying your Jan. 2010 mortgage in December, 2009.

Grab a mortgage statement and find out how much of your monthly mortgage payment goes to interest. What you find might surprise you. If you pay your homeowners insurance and property taxes through your mortgage company (a common practice) a substantial chunk of your monthly payment goes toward those, and you do not get to deduct those items by paying them early. Likewise, if you have had the same mortgage for many years, or you have a 15-year mortgage, a big hunk of that monthly bill might actually be going toward principal. (The horror!

A $2,000 monthly mortgage payment might breakdown as $500 per month into escrow (for the taxes and insurance) and $500 per month going toward principal, leaving just $1,000 per month paying interest.

For a taxpayer in the 25% tax bracket, paying that extra mortgage payment a year earlier will result in a tax savings of $250 in real dollar numbers. Conversely, that will be the approximate cost of forgetting to do the same thing next year. Even worse, is if the taxpayer forgets to do the same thing next year, AND forgets to properly account for the fact on their 2010 taxes.

Tax Savings Blunder Example:

Assume our taxpayer pays 13 mortgage payments in 2009 thanks to the advice in a year-end tax savings tips article. He saves $250 on his 2009 taxes.

Let’s that come 2010, our taxpayer is very busy at year end racking up sales and commissions to increase his income. He doesn’t have time to read any of those tax advice year-end articles and isn’t really thinking about Federal income taxes as he flies around the country trying to make sales.

Come April 13th, he fires up TurboTax or some other tax preparation software and types in all the numbers. In the tax deductions section he inputs his mortgage information. If he used TurboTax to file taxes in 2009 or imported his 2009 tax returns, he might get a flag about entering his mortgage info, and maybe not. Even if he does, there is no guarantee that he will pay any attention to it as he rushes to complete his taxes. After all, entering in the mortgage information from the 1099-DIV the mortgage company sends is a no brainer, right?

Unfortunately, he includes all 12 months worth of interest on his 2010 income taxes. Since he did not pay the January 2011 mortgage payment in December 2010, he actually can only deduct the remaining 11 interest payments in 2010.

In 2011 or 2012, or taxpaying hero gets a phone call from the IRS. It’s informational audit time and the IRS would like to see additional documentation regarding his 2009, and 2010, mortgage deductions. The taxpayer does the smart thing and runs to a tax attorney, accountant, or enrolled agent, and finds out to his dismay that he owes back taxes and a penalty. Chances are, he’ll get out of any fraud trouble, but it still won’t be cheap to pay up, especially if it takes two or three years to get around to the audit and that interest payment has added up.

Tax Advice Worth It?

Is it worth a $250 savings to follow this tax advice? You bet it is! Why pay extra when you don’t have to. But, if the above example sounds a lot like you, you might want to think twice, or make a really big note in your 2010 Taxes file.

But, what if the taxpayer is in the 10% tax bracket? Don’t laugh, it’s possible for high-income taxpayers to save enough money through deductions to get down to a tax bracket of 10%.

Then, the above example is worth just $100. Many other tips and advice will produce raw dollar amounts of tax savings of even less, sometimes just $10 or $20 for a complicated strategy that involves collecting a lot of receipts and getting a bunch of tax forms just right.

In the end, you are the judge of what anything is worth to you. The important thing is that you know what its real value to you is before you waste time and money on something that has limited value.

Tax Deductions Value

One final, very important thing to consider when determining the cash value of any tax savings advice is its possible impact on other tax deductions. To determine whether or not this need concern you, pay attention to any tax credits or tax deductions that are phased out or that have income limits. Depending upon the tax deduction or credit and where the tax savings created by the strategy used occur (above the line or below the line) the value of a tax-savings tip may actually be much higher than just the amount directly created by the tax avoidance strategy.