It’s tax time again: Some reminders

Posted on Jan 12, 2010

* Deduction reminders

With the ever-changing tax law, it’s easy to lose track of what’s deductible from one year to the next. Don’t overlook these deductions available for your 2009 return:

* Sales tax paid on up to $49,500 of the purchase price for a new vehicle.

* Choice of deducting sales taxes paid in 2009 or state and local income taxes paid.

* Educator’s deduction of up to $250 for classroom supplies purchased.

* Deduction for college tuition and fees.

* Additional standard deduction of up to $500 ($1,000 for couples) for real estate taxes paid.

Various restrictions and income limits usually apply.

* IRA contributions

Make contributions as early in 2010 as you can. If you didn’t reach the 2009 contribution maximum last year, designate 2010 contributions as being for 2009 until you reach the dollar limit or April 15. Then you can deduct these contributions on your 2009 return for a quicker tax benefit.

* Check your children’s income

Your children may be required to file a 2009 income tax return, too. Generally, a 2009 return is required if the child had wages of more than $5,700, self-employment earnings over $400, or investment income (such as dividends, interest, or capital gains) over $950. If your child had both earned and investment income, other thresholds apply. Also, if your child is due a refund, a return must be filed to get it.

* Charity recordkeeping

The law has strict recordkeeping requirements for deducting charitable contributions. For cash contributions under $250, you must have a bank record such as a cancelled check, credit card record, or receipt from the charity. For donations of $250 or more, a receipt from the charity must be obtained before filing your return.

* Your tax refund

If you’re among the many taxpayers who get a large tax refund this year, do yourself two favors: (1) invest the refund instead of spending it, and (2) adjust your withholding for 2010 so your money can be invested for you rather than the government.

Extension request:

For most people, the deadline for filing a 2009 individual income tax return is April 15, 2010. If you cannot file your return on time, be sure to file an extension request with the IRS by this date. You must pay any tax due by the April 15 deadline to avoid penalties and interest, but an extension gives you until October 15, 2010, to file your return.