It’s crunch time. We are less than a month away from the tax deadline, but if you have not filed your 2008 taxes yet, you’re definitely not alone. According to the IRS, 1 in 5 taxpayers don’t file their taxes until the final week ahead of the April 15 deadline. Last year, 27 million taxpayers waited until the final minute before the tax deadline.
Filing your taxes early is definitely encouraged, but if you’re one of the many who has not yet filed, you may be surprised to know that there are a still few ways to maximize your tax return. Some of these tips are geared towards allowing you to get your return quicker or holding onto your payment longer so that you may invest it however you decide. Other tips are actually designed to increase your tax deductions from the 2008 year.
Contribute to a Traditional IRA
For those making last minute attempts to reduce their tax payment, or get a bigger refund, you can contribute to your traditional IRA up until April 15th. You can contribute to a Roth IRA as well, but it won’t impact your tax return. Additionally, if you have an SEP or a Keogh IRA, you will get a filing extension to October 15th. To qualify for the full annual IRA deduction this year you must either:
a. not be eligible to participate in a company retirement plan
b. have adjusted gross income of less than $53,000 if you are single, or $85,000 or less for married couples filing jointly.
E-File your Taxes
If you e-file your federal return and request direct deposit, you can expect to receive your return within 10 business days. Additionally, e-filed returns are much less likely to contain errors. E-files are accepted or rejected within 48 hours and have an error rate of 1 percent versus an error rate of 20 percent for paper returns. You won’t get more money, but you’ll get it sooner so that you can invest it however you prefer.
Hold on to your Cash
Owe money on your return? File now and hold onto your cash. You can now have your payment drawn electronically on April 15. You can also use a debit or credit card (may result in a transaction fee) if you prefer. Don’t make this a strategy in future years, as those who owe over $1,000 generally have to pay a tax underpayment penalty.
Get a Second Chance at Last Year’s Stimulus
If you didn’t receive a full $1,200 (married joint filers) or $600 (individual filers) – plus $300 per child, then you may have a second chance to claim last year’s stimulus rebate. Calculate the credit using the worksheet on page 62 of your 1040 instruction package. You can then enter the amount on line 70 of your tax return.
Itemize your Taxes
The standard deduction in 2008 is $5,450 for singles and $10,900 for married couples filing jointly. But you’re not ‘standard’, you’re above standard. Itemizing your tax deductions can have a huge impact on your tax return. If you are self-employed, have a home or mortgage, or have a lot of out-of-pocket medical expenses, you may have a good shot at saving more through itemized deductions than taking the standard deduction.
For more of GE Miller’s writing, visit 20somethingfinance.