Grant Thornton Offers Eight Last-Minute Tax Planning Tips

by Mike Godfrey, for LawAndTax-News.com, Washington

09 April 2009

A US division of the UK-based chartered accountants Grant Thornton is offering eight last-minute tax planning tips to individuals preparing their tax returns in the US.

The company's advice has been designed to help taxpayers avoid common filing season hassles and possibly uncover savings which they may have overlooked.

"You can't go back and change what happened last year, but believe it or not, there are still things you can do now to affect your 2008 tax return," said Grant Thornton LLP tax partner Mel Schwarz.

"There are also several tax law changes that taxpayers need to keep in mind," he added.

The company is offering taxpayers who haven't filed yet the following eight tips for tax planning at the midnight hour:

• Claim your stimulus rebate. Individuals might have an opportunity to get an extra rebate check. The IRS mailed most taxpayers rebate checks in 2008 providing USD600 (GBP410) for individuals, USD1200 (GBP820) for joint filers and USD300 (GBP205) for each dependent. But the credit phased out for those with incomes under USD3,000 (GBP2,051) or over USD75,000 (GBP51,288), and the calculation was based on taxpayers' 2007 returns. Taxpayers can redo this calculation based on their 2008 situation, so they may be entitled to a bigger rebate if they added a child or their salary changed.
• New property tax deduction. Congress passed tax legislation last year giving non-itemizers a new above-the-line deduction on real property taxes of up to USD500 (GBP342) for singles and USD1,000 (GBP684) for married couples filing jointly. If individuals don't itemize their deductions, but paid property taxes last year, then they need to remember this deduction.
• Reduce income with last-minute contributions. It's not too late to make tax-free contributions to an Individual Retirement Account (IRA) or Health Savings Account (HSA). If an individual is eligible to participate, they can set up these accounts and make deductible contributions up until the end of this year's filing season. Contributions to these accounts are especially valuable because they are deducted above-the-line, i.e., before a person calculates their adjusted gross income (AGI). This means they are allowed in full and make it less likely that other tax benefits will be limited
• Don't miss the deadline for filing an extension. Grant Thornton is urging taxpayers not to bury their heads in the sand if they're not going to get their returns filed on time. Filing for an automatic extension with Form 4868 is painless and will spare taxpayers penalties for missing the deadline. However, 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, individuals must have paid at least 90% of their 2008 liability through withholding, estimated payments and any payment made with their extension.
• Consider filing electronically. Filing electronically will speed up refunds and can save simple mistakes. Before the IRS accepts an electronic return, it checks for several critical errors, including whether Social Security numbers and names match. The IRS gives taxpayers the chance to correct the problems before it accepts and processes an electronic return.
• Check numbers twice. Individuals are also being urged to avoid math errors and make sure their Social Security numbers are right. The IRS computers automatically match all Social Security numbers and check for simple math mistakes. If a number for one dependent is written down wrong, 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.
• Watch out for the "kiddie tax." The "kiddie tax" was expanded last year. It now applies to full-time students under the age of 24 whose earned income does not represent at least one-half of their support. Under the kiddie tax, income from these dependents can be taxed at a higher marginal rate.
• Get your charitable house in order. In order to be deductible, a charitable cash contribution must be documented with a bank record or a written communication from the charity. If an individual claims a charitable deduction on their return of over USD500 (GBP342) in donated property, they must file Form 8283, "Noncash Charitable Deductions." If a person is claiming a deduction of USD250 (GBP171) or more for a car donation, they will need a contemporaneous written acknowledgement from the charity that includes a description of the car. Deductions for donations to individuals, social clubs, political groups or foreign organizations cannot be made.

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