Complete Tax

By Robert Steere, Toolkit Staff Writer

As we near this year's April 15 tax deadline for filing our income tax returns, many of us may think that focusing on this year's tax return is as much as we can do. That's understandable. The task of gathering records and data, sorting and compiling the relevant information, and filling out tax forms or tax preparation computer programs is often enough to make your head spin.

But, as you wrap up your work on the 2009 return, remember that we have continuing obligations as taxpayers, and another tax filing season is only a year away. It may be the perfect time, while your mind is still churning with tax information, to consider the planning you can do to handle your tax-related issues during the coming year.

Wrapping up 2009 taxes. For many taxpayers, the 2009 filing season may not be nearing its end, yet. You may be one of many who file IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, for an automatic six-month filing extension. Perhaps you haven't received all the information you need in order to complete your return. Or maybe you just don't have the time to focus on tax return preparation right now. If so, by getting an automatic extension, you may delay the inevitable filing deadline until October 15, 2010. But remember, the filing extension does not extend the time for paying the amount of tax that will ultimately be due, so make sure you do a careful estimate of the tax that will be due, and make your payment by April 15 to avoid late payment penalties and interest.

Similarly, the 2009 tax year may not be entirely behind you if adjustments need to be made for inaccuracies on your 2009 return. You may need to file an amended return (IRS Form 1040X). The IRS usually corrects math errors or requests missing forms, but if you mistakenly omitted an item of income or a legitimate deduction or credit, you will want to file an amended return to make the correction. For example, maybe you forgot to claim your $400 "making work pay" tax credit. It is wise to file an amended return as soon as possible after you discover the error, but it must be filed within three years after you filed the original return in order to receive any tax refund resulting from the amended tax return.

An example of a situation where filing an amended return could be beneficial is if you are a qualified first-time homebuyer and you enter a binding contract to buy a new principal residence by April 30th and close the deal by June 30th. You can then file an amended 2009 return to receive a refundable credit of up to $8,000 for the purchase of your new home. Of course, if you are already planning to buy a home and claim the homebuyer credit, it may make more sense to file for an automatic extension and then file your original Form 1040 when your home purchase is complete.

Planning for 2010 taxes. In any event, as you wrap up your 2009 tax return preparation, take some time to think about your taxes for 2010. Try to learn from this year's tax season. With just a modest investment of your time now, you can use this year's experiences to help plan for next tax season.

Tax planning insights come in various forms. There are insights dealing with the mechanics of gathering your tax data, preparing your tax returns, and filing your tax returns. There are also insights dealing with actual tax planning ideas that can influence your tax liability for the coming year. These may include ideas about pursuing and using specific types of income, deductions and credits that will reduce your overall tax bill.

The mechanics of tax filing include things like maintaining necessary records throughout the year, being able to easily find the records and files you need come tax time, your method of preparing your taxes (e.g., paper and pencil, software, professional tax preparer, etc.), and anything else necessary to complete and file your tax return on time (e-filing, for example). When considering these matters, evaluate what worked and what didn't during the last time around. Then, commit to changing your ways and make any necessary adjustments in the coming year.

As far as tax planning goes, knowing where you've been can help you get to where you want to go, especially if you're self-employed. In other words, seeing how you came out on your last tax return can help alert you to changes that need to be made to minimize your tax burden next time.

For example, if you underpaid your estimated taxes and paid a penalty, or if you overpaid your taxes and got a huge refund, you should adjust your estimated tax payments or withholdings throughout this year, accordingly.

You will want to explore the different deductions and credits available to lower your overall tax bill, like investing in a retirement plan or purchasing assets for your business.

You will want to familiarize yourself with various other deductions and credits that may be available to you for certain activities or events in 2010, including such items as the $8,000 First-time Homebuyer Credit for a qualified purchase of a new home, the $2,500 American Opportunity Education credit for college tuition, the $2,500+ credit for New Qualified Plug-in Electric Drive Motor Vehicles, and the $1,500 credit for Nonbusiness Energy Property. All of these were available in 2009, too, but if you haven't had the chance to take advantage of them, they'll still be there for 2010. If you run a small business and have employees, you will want to consider the new tax credit in effect starting in 2010 for employer-paid health insurance premiums for your employees.

If you had a more difficult tax season than usual, remember to plan now to prevent history from repeating itself next year. In the meantime, may the remainder of the 2009 tax season go well with you, and may next season's efforts be the most successful ever. Know that you can always go to the IRS website for additional information on tax deductions and credits and forms.

For more help with the many tax changes that may affect you for the 2010 tax filing season and beyond, take a look at the Tax Guide 2010.

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Posted April 6, 2010.