With the current tax year winding down, the Internal Revenue Service is encouraging taxpayers to plan now and get organized for next year.
“With less than two months to go before the end of the tax year, you may want to set aside a few moments before the busy holiday season to consider some quick IRS tips that may give you the gift of time and money saved next year,” said Dianne Besunder, IRS spokeswoman for New York.
Get Your Records Together-- Gather and organize your tax records now to reduce stress at tax time. You should consider setting up a filing system before year end and when your tax documents (W-2’s, 1099s, etc) arrive; file them together so you won’t have to search when you begin to file your tax return.
You should keep any and all documents that many have an impact on your tax return. Generally, tax records should be kept for three years, but some documents, for example, records relating to a home purchase or sale, stock transactions, IRAs, rental property or a business, should be kept longer. For more information see IRS Publication 552, Recordkeeping for Individuals.
Get the Most Out of Your Retirement Accounts
Are you maximizing your contributions to your retirement accounts? This year, you can contribute up to $5,000 in an IRA, as well as another $16,500 to a 401(k) employee plan. If you’re 50 or older, those numbers go up to $6,000 and $22,000, respectively.
Get Documentation for Your Cash Contributions to Charities
To be deductable on your 2011 tax return qualified charitable contributions must be made before year end. You must itemize deductions on your tax return to claim charitable contribution and you must have a bank record or a written communication from the qualifying charity showing the name of the charity and the date and amount of the contribution.
A bank record includes canceled checks, bank or credit union statements and credit card statements. More information can be found in IRS Publication 526, Charitable Contributions. IRS publications are available at www.irs.gov.
Get Information about the Earned Income Tax Credit
Are you wondering if you might benefit from the Earned Income Tax Credit, which is available to low and moderate income workers? Use the EITC Assistant on the IRS website which helps determine eligibility for the credit.
The program will also assist you in determining your correct filing status, determining whether your child meets the tests for a qualifying child, and estimating the amount of credit that you may receive. Taxpayers who earn less than $49,078 in 2011 may be eligible for a refundable tax credit of up to $ 5,751.
Get Information on Updating Your Name and Social Security Number
If you are married or divorced in 2011, make sure you report any name change to the Social Security Administration before you file your tax return. If your name doesn’t match your social security number, your refund can be delayed.
To get more information about updating your name change visit the SOSA Website at www.social security.gov or call 800-772-1213. And, report any address change to the Postal Service, your employer and the IRS to make sure you get tax-related items.
Get a Tax Break for Education Expenses
There are two federal tax credits available to help you offset the costs of higher education for yourself or your dependents. These are the American Opportunity Credit and the Lifetime Learning Credit.
To qualify for either credit, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. If the student was claimed as a dependent, the student cannot file for the credit. The American Opportunity Credit can be up to $2,500 per eligible student.
And it is available for the first four years of post-secondary education. Lifetime Learning Credit can be up to $2,000 per eligible student and is available for all years of postsecondary education and for courses to acquire or improve job skills. Income limits and other restrictions apply. For more information about these credits see IRS Publication 970, Tax Benefits for Education.
Get a Tax Credit for Adopting a Child
For tax year 2011 the maximum adoption credit to $13,360 per child. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. The credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses.
Income limits and other special rules apply. Taxpayers can claim the credit by filling out Form 8839, Qualified Adoption Expenses and must include one or more adoption-related documents.
“For more information on these topics and many others that may save you time and money come tax time, visit the official IRS website. Make IRS.gov your first stop for all your federal Income tax needs and questions,” Besunder said.