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.

Small business tax deductions are important in order to offset high business taxes levied against small business owners and entrepreneurs. This is especially true for work from home entrepreneurs who file as sole proprietors, or as a Limited Liability Company aka LLC, with sole proprietor tax status. Small business owners can get hit with high tax bills thanks to Self Employment Taxes.

Self-employment taxes, or SE Tax, is so high because it includes taxes that would usually be paid by the employer. In a typical employer-employee scenario, the employee pays 6.2% in Social Security Taxes. The employer withholds this amount from the employee’s paycheck. What many people don’t realize is that the employer also pays 6.2% in social security tax for the employee.

A small business owner that files as a sole-proprietor is on the hook for the whole amount! The self-employment tax rate for 2010 – sometimes called the SE tax rate – is 15.3%, which is 12.4% for social security taxes plus another 2.9% for Medicare taxes.

That 15.3% is on top of regular Federal Income Taxes. A successful small business owner in the 30% tax bracket, pays a blood curdling 45% tax rate. And, that is before adding in Medicare tax and state and local taxes.

In other words, a small business owner can easily end up paying 50% taxes!

Deduct Self-Employment Tax

The only good news in this whole equation is that half of the self-employment tax can be deducted when figuring adjusted gross income. Of course, this is small consolation because it results in under 2% tax savings. In order to keep from paying too much income tax, the entrepreneur needs to find bigger tax deductions and other small business tax breaks.

Depreciation Rates

Some of the biggest small business tax deductions come from the purchase of equipment for the business. Unfortunately, big purchases are often considered capital expenditures that must be depreciated over the “useful life” of the product. The best small business tax advice is to get accelerated depreciation whenever possible to get higher tax deductions now.

The only defense against high taxes from running a small business is to get as many business tax deductions as possible. The business lowers its profit for tax purposes, and passes along less income to the business owner on Schedule C – Profit and Loss From Business Operations.

Section 179 Deduction

IRS Section 179 allows for better small business tax deductions and bonus depreciation in some cases. A section 179 expense allows for business expenditures to be deducted immediately, instead of depreciated. This is very useful for dated tax depreciation limits like those that apply to high-tech equipment.

For example, a freelance writer needs a netbook for his freelance writing business, with a Section 179 deduction, the small business owner deducts $200 in the year the netbook was purchased, instead of deducting a measly $40 per year for five years.

The Section 179 tax deduction rate was set to drop back to $134,000 after the special bonus depreciation and higher 179 limits increased in economic stimulus legislation expired after 2009. However, the new jobs creation legislation recently passed by Congress extends the higher ceiling for Section 179 tax deductions. The 2010 Limit for Section 179 Deductions is $250,000 for qualified capital expenditures. There is currently no extension of the higher amount into 2011; that may change depending on how the US economy recovers in 2010.

Maximizing Section 179 Tax Deductions is important personal finance advice for any entrepreneur. More 2010 tax tricks and updates are coming soon. The new IRS Mileage Rates for 2010 and other IRS numbers for this year are already published.

How do you save on your small business taxes?

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

Sometimes it seems cold and heartless to think about money and tax deductions. With hundreds of thousands dead and untold masses homeless, not to mention a country destroyed, this can seem like one of those times.

On the other hand, when people choose to open their hearts and give money to help those in need, the U.S. Government thanks them in the form of the charitable tax deduction. Typically, donations to charity must be made by the end of the tax year, December 31st, in order to be deductible in that year. However, with the tragic earthquake that struck Haiti, Congress passed a law and the IRS implemented an exception to the rules for certain cash contributions for Haiti Relief.

In order to qualify, the donations must be considered “cash” donations (checks and wire transfers, and so on do count as cash). They must also be made to a qualified organization, typically a non-profit 503(c) organization in most cases. The donations must also satisfy all other normal requirements for deducting cash gifts to charities.

The deadline for making a cash donation for Haiti relief and being able to deduct it on your 2009 Federal Income Taxes is March 1, 2010 (today).

If you already made a donation, you can deduct it from your income taxes as well.

Unfortunately, one of the requirements for taking a tax deduction for a cash contribution to a charity is retaining proof of the contribution, most often, in the form of a receipt. However, in the aftermath of the Haiti tragedy, numerous new methods of making quick and easy donations to relief organization were created, including the ability to donate via text message.

A live television show broadcast nationwide ran numerous donation options across the bottom of the screen during the Haiti Relief telethon, including the option to donate $10 via text message. The $10 donation was then added to the phone bill of those who sent such a text.

Fortunately, the IRS has clarified that a phone bill from your cell phone company or other telecom provider will satisfy the record of proof requirement. This 2009 tax trick is particularly helpful for those of us who made donations upon seeing the devistation without pausing to think about the tax implications.

Be sure to hold on to your phone bill, however, for your records. If you follow smart financial advice about paying your bills automatically and opt-in for electronic statement delivery as one way to help prevent identity theft, then you need to log on to your account and print out the electronic statement to ensure that you have a printed record of your donation.

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.

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.

Save more receipts.  That is how to pay less money on your taxes next year. 

You wanted something more amazing didn’t you.  So do most people, which is why they buy books and magazines and secret kits and then pay the same amount of taxes as they did last year.

This year try something different.  Just save more receipts.  When it comes time to file your taxes you won’t use any more lines on the tax forms for deductions, but you will be able to have higher numbers on the lines that you already use.

A Smaller Tax Bill

Wait ‘til next year.  The most often used phrase in sports may also be used by many taxpayers this week as the stress and shock of filing federal income taxes wears off.  Whether it was having to write the IRS a big check, or if it was seeing how your tax bill compared to others, or if it was just seeing the enormous number that you earned but never got to see thanks to paycheck withholding, it’s common to want to pay less taxes next year.

Paying less taxes is a goal that most Americans have.  Yet, it is a goal that most of us fail at.  The problem is two-fold.  First, life happens.  We get busy, we have other concerns, and pretty soon, the amount of money being sucked out of our paychecks each week or each month fades into the background noise until early next year, when once again, we are forced to remember how much money we lose each pay period to taxes.

The second problem is that even when we do manage to take action, it is often the wrong action.  Huge books line the shelves at libraries and bookstores offering children’s fantasies to pay zero taxes, or to cut your tax bill in half.  Others, simply promise to give you all the knowledge of a CPA or an MBA in 21 days, or whatever.  The truth is that the answer to lower taxes does not lie inside the thick books, nor in some unknown trick carefully hidden in the dark shadows of finance and tax law.

The Tax Secrets Myth

Every year, literally millions of people examine the tax code, tax laws, and all of the tax changes to find ways to save money for themselves or their clients on taxes.  Their findings are not kept a secret.  Instead, they are propagated through advertising, publishing, and numerous other methods.  However, it is in some people’s interest to continue spreading the myth that their are tax secrets, that you are a sucker who pays too much because you don’t know them, and if you would just buy their book, their kit, their package, their subscription, their service, their whatever, you too could pay zero taxes!  As you can imagine, every one of these people has something to sell you.

Here is the little known truth about income taxes.  Payroll taxes are virtually impossible to lower in any meaningful way.

Shocked? Don’t believe me?

Grab any tax tricks book, website, or article you want.  Start reading.  You will see all kinds of ways to do things about lowering your taxes, but look closer.  You have to have something else first.

1035 Exchange?  It’s great, but it only works on real estate.

A deduction you’ve never heard of before?  Do you have to have a small business first? Or, does it have to be a certain percentage of your income before it counts?

Trusts?  Works on assets, but not paychecks.

Off-shore accounts? Ditto.

What does work?  The usual.  Home mortgage interest, property taxes, state & local taxes, child care, child tax credit, student loan interest, tuition, capital losses/gains, dividends, IRA contributions, and charitable gifts.

Medical bills work, but only if they are at least 7.5% of your income, and then there are a bunch of miscellaneous deductions.  These are the ones that people love to tell about that are “secrets”. 

The truth is even if you tried to get every one, they probably would still have no impact on how much taxes you pay because they don’t count until they exceed 2% of your income.  Did you subscribe to enough magazines, buy enough tax software,  and drive to enough seminars to add up to 2% of your income?

Most people don’t.  That is why they don’t know about those deductions.  They don’t apply to them.

Which Deductions Can Normal People Get

When it comes to taxes, there is a standard list of tax deductions that are likely to apply to most people.  Everything else is a specialized gimmie to a special interest group, or a political ploy to appeal to certain voters.  In others words, it isn’t for you, and getting one of those deductions is likely to cost you more than you would save.  Your best bet tax-wise is to not worry about these “secret” deductions. 

If you are afraid that you won’t get one of the special tax deductions when you qualify, don’t worry.  Someone will tell you.  Someone will be so eager to tell you that you’ll know about it before you have even thought about any tax implications.  Why?  Because every finance or transaction professional in the world wants to have your business and they all have been repeatedly told that saving you money on taxes makes their service more valuable.  So, when you go to sell a piece of real estate that might qualify for a 1035 Exchange (your home does not), trust me when I tell you that the real estate agent, the loan officer, and probably even the people at your bank will bring it up.

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Today is April 15.  For those of you from non-US countries, that probably doesn’t mean much.  To us Americans, today is Tax Day, the deadline to file my tax returns.

If you’re working at the last minute then you might be looking for last minute tax tips.  Of course, what many people really want to know is what happens if you don’t file your taxes by the deadline and is there anything I can do if I can’t get my taxes done?

The answer, actually, is surprisingly benign.  Filing late is a no-no and can result in all kinds of problems, not the least of which are penalties.  But, there is a ray of hope.  Instead of filing your tax return, file for an extension.  One extension is granted automatcially, so all you have to do is send in the form.  If you can’t get your taxes done by April 15, then make sure you file your request for extension in its place to avoid penalties, fees, and interest.

If you file for an extension when are your taxes due?  October 15th, a full six months later.  Whew, big relief eh?  You’ll need IRS Form 4688 Filing for an Extension.  It has instructions for using the paper form, or other electronic methods.

But, there is a catch.  Your TAX RETURNS are given an extension to September, your TAX PAYMENT is not.  In other words, if you end up owing money, you still have to pay it by April 15th even if you get an extension.  How are you supposed to know how much to pay if you haven’t done the tax return yet?  Guess.

Actually, estimate, is the correct answer, and make sure you are on the “over” side, not the “under” side.

For example, if you’ve partially completed your taxes and it looks like you would owe about $2,000 but you haven’t gotten all of your income entered in yet, then send Uncle Sam a check for $3,000, or whatever you are pretty sure will end up being too much.  You’ll get the extra back as a refund when you do finally file your income taxes which is an incentive to do them before September.

On the other hand, if it looks like maybe you’ll owe $2,000 and you are positive all of your income is accounted for, it’s just that you aren’t sure about some deductions, then send the IRS the two-grand and see if those deductions work out.  If not, no harm, no foul.  If so, you’ll get a rebate too.

If you still plan to beat the midnight deadline, make sure you know which, if any, post office in your area will be staying open late to collect tax returns.  With budget cutbacks, you can expect the post office to be a little less grand in how many collection locations it leaves open late.