Daily Tax Tips April 2013

Hallelujah! We're in the home stretch of tax filing season 2013.

Time is rapidly running out to finish your 2012 Form 1040 (or 1040A or 1040EZ) and get it to the Internal Revenue Service. But don't panic. We've got tips to help you file your return and get started on 2013 tax planning.

The April 2013 Daily Tax Tips below will run through deadline day, April 15. As expected, most of them are geared toward those of us who put off our tax duties until the last minute.

You'll find the dailly tip featured each day, weekends and holidays included, in the upper right corner of the ol' blog.

But if you miss them there, you can find all of this year's previous daily tax tips on their specific pages: January, February and March.

Many of the tips that have been posted throughout this filing season are part of Bankrate's annual tax guide. Others are original Don't Mess With Taxes advice.

If, however, you've already finished your annual tax filing task (I am soooo jealous!), stick around anyway. You'll also find some 2013 tax planning moves that could help you lower this year's tax bill.

Here's what's happening in the Daily Tax Tips for April 2013.

Traditional IRAs work well for some taxpayers -- You have several choices when it comes to individual retirement accounts. All offer some tax savings. The issue is exactly when do you get those savings. For some people, a traditional IRA still has a lot of appeal because it offers immediate tax savings. If this is your situation, you're able to deduction your contribution -- $5,000 for tax year 2012; $5,500 for tax year 2013 -- in full or at least part of it as an above-the-line deduction right on your Form 1040 or 1040A. (April 1, 2013)
What are the Roth IRA rules? -- Retirement accounts get added attention during tax-filing season. That's because they are the only potentially tax-saving move you can make after the end of a tax year. You have, in most cases, until the April filing deadline to put money into an individual retirement account. This applies to traditional IRAs as well as Roths. But with a Roth IRA, your eventual withdrawals in retirement are tax-free. Roths also are more flexible that their traditional cousins. You don't have to take required minimum distributions (RMDs), meaning your nest egg can keep earning for you as long as you, not the Internal Revenue Service, wants. But there is a drawback; you can't open or contribute to a Roth IRA if you make too much money. For 2012, that's $183,000 if you're married filing jointly and $125,000 if you file as single, head of household or married filing separately and did not live with your spouse during the year. (April 2, 2013)
Tax credit for savings made for retirement -- Contributors to retirement plans already know the long-term tax advantages of an individual retirement account or 401(k). Now a tax credit will let some moderate- and lower-income savers reap the rewards of their retirement thrift early. You can find the retirement savings contributions credit, also called the saver's credit, on Form 1040 and Form 1040A. Because the tax break is a credit instead of a deduction, it's a better deal. Tax deductions reduce taxable income, but you claim tax credittax credits after you calculate how much tax you owe, using the credit to reduce your Internal Revenue Service bill dollar for dollar. In the case of the retirement saver's credit, you might be able to cut your tax bill by as much as $1,000. That's the maximum credit you can claim if you contribute at least $2,000 to an individual retirement account, traditional or Roth, or to a workplace savings plan, such as a 401(k). (April 3, 2013)
12 tax scams to avoid in 2013 -- Tax season is prime tax scam season. As the April filing deadline nears, criminals prey upon people's fears of making a tax return mistake or appeal to their desire to get a bigger refund. Every year, the Internal Revenue Service issues its list of the dirty dozen worst tax scams. This year's 12 cons range from improper application of real-but-arcane tax laws to downright false claims, along with perennial attempts to get individuals to provide personal information that can be used to steal identities. In fact, tax ID theft again tops the scam list for the third straight year. But be on guard for all of these dirty tricks. Remember, if a tax saving scheme sounds too good to ge true, it probably is. (April 4, 2013)
Cash in on uncommon charity tax deductions -- If you think your tax deduction for charitable contributions ends when you write a check to your church or drop off that box of clothing at your neighborhood thrift store, think again. You may be cheating yourself. The Internal Revenue Service allows several different ways to take tax advantage of your good will. You can count the miles you drive in providing service for a charity, such as delivery meals to shut-ins, at 14 cents per mile. The hours you volunteer aren't deductible, but you can write off your out-of-pocket costs for supplies you bought for the charity where you put in some pro bono hours. And if you donate some stock that's appreciated in value, it can be a nice gift for your favorite nonprofit and a decent deduction for you. (April 5, 2013)
6 free tax filing options -- Tax Day is almost here and you've decided you need help filing your return. Even at this late date you might be able to get some assistance with your taxes. Even better, it could be free. Here are six no-cost options: 1) Free File, 2) free fillable tax forms, 3) Volunteer Income Tax Assistance (VITA VITA), 4) Tax Counseling for the Elderly (TCE), 5) Walmart's MyFreeTaxes and 6) tax software deals. Check them out. Here's hoping that at least one filing option will meet your needs (and vice versa) and you can get your taxes done without spending a penny. (April 6, 2013)
Gifts to pay down federal debt are tax deductible -- Donating money to help reduce the federal debt is one of the more unusual charitable tax deductions. It's also tax deductible. You have two ways to send an additional amount to the Bureau of the Public Debt. Go to Pay.gov and make your donation electronically or write a check and mail it to the Parkersburg, W.Va., office. Whichever way you choose to donate to the U.S. Treasury, be sure to follow the regular charitable giving tax rules, including getting a receipt. (April 7, 2013)
7-day tax-filing plan -- Are you freaking out because you have one week -- seven days -- to do your federal (and, for many, state) taxes and you haven't even started the process? Don't. You can get a lot done in one week. Still skeptical? Check out my seven-day tax filing plan slide show. Here's a preview: 1) Gather data. 2) Examine exemptions, adjustments to income. 3) Decide on your deductions, deduction method. 4) Find your forms. 5) Count your credits. 6) Fill out your forms. And 7) Sign, seal and deliver. Optional step 8: Par-tay! (April 8, 2013)
Reporting your investment earnings -- You call it making your money work for you. The Internal Revenue Service calls it unearned income. Regardless of the name, the tax collector wants to know how much you make each year on earnings from your savings accounts, stocks and bonds, certificates of deposit or mutual funds. If your dividend and interest income is less than $1,500 in each category, you don't have to file Schedule B with your Form 1040 or Form 1040A. You simply list your interest and dividend income directly on your tax return. Capital gains distributions also can be reported directly on your tax return if that's the extent of your earnings. You will, however, have to do some additional calculating to come up with your appropriate tax bill on this income that, in many cases, is taxed at a lower rate than your ordinary income. But it's worth it -- and usually taken care of by your tax software -- to owe Uncle Sam less. (April 9, 2013)
Home energy tax credits pay off at tax time -- If you made improvements last year to your home to make it more energy-efficient, Uncle Sam wants to help. The home energy efficiency tax credit is available for claiming on 2012 and 2013 tax returns. The $500 lifetime maximum tax credit is parceled out in varying amounts for different types of residential energy upgrades. The tax breaks range from $50 to $300 depending on which products you use and what energy efficiency changes you make to your home. The Energy Star website has details on the various home energy tax credits. (April 10, 2013)
Ways to e-pay your tax bill -- Consumers are increasingly comfortable with online bill paying. So it's no surprise that Uncle Sam also wants to cash in on electronic money moving. Just as the Internal Revenue Service has made it easier to file online (and at no cost for many taxpayers who use Free File), the federal tax collector also has made it easier to pay what you owe electronically. There are three easy options. You can (1) pay with a credit or debit card, (2) authorize Electronic Federal Withdrawal (EFW) from your bank account of what you owe or (3) use the IRS' Electronic Federal Tax Payment System (EFTPS). (April 11, 2013)
Ways to pay big tax bills -- If this year's tax filing deadline will be a "pay" day for you and you don't have the cash, the Internal Revenue Service gives you several payment options. If your credit card line is large enough, charge it, although it seems that fewer folks plan on using plastic to pay taxes in 2013. If your tax bill is too large for a credit card, the IRS will take monthly payments. Apply for an installment plan via Form 9465, either filing the paper form or applying online. And if you just can't pay your full bill at all, now or in the future, look into making the IRS an Offer in Compromise (OIC). Here the IRS will, if you make an honest and persuasive case, take less than your full tax bill. OIC details are in the IRS Form 656 Booklet. (April 12, 2013)
Tax tips for snail mail tax filers -- Most people e-file their tax returns nowadays, but there still are some paper 1040 holdouts. If you're sending in a paper tax return, in addition to finding a Post Office branch near you and open when you need it, here are some things to think about. Mail your return first class. Affix enough postage. If you're mailing a lot of forms, attachments and documentation, you'll need more than one Forever stamp. Put your return address on your envelope. Send your return to the right IRS office. The IRS has been consolidating its operations over the last few years, so use the IRS' interactive map to find where to send your 1040. (April 13, 2013)
Free online filing for state returns, too -- Most states collect taxes each year on their residents' earnings. Those that don't tax any type of individual income are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. New Hampshire and Tennessee tax only dividend and interest income. In the other 41 states and Washington, D.C., annual forms must be filed. And in most of those places, those state taxes are due at that same time as federal tax returns. That's April 15 or the next business day when Tax Day falls on a weekend or holiday. And just like the federal Free File program offered by their larger tax agency cousin, the Internal Revenue Service, most state revenue offices also offer their residents (or nonresidents if you owe telecommuter, aka jock, taxes) the option to directly file their state tax returns online and for free. (April 14, 2013)
It's Tax Day! File something! -- Time's up! April 15, despite all your wishing and hoping, has arrived. You've put off filing for 3½ months, but any more procrastination could cost you. So don't just sit there. File something today. Ideally, it will be your Form 1040. But the reality is that millions of us procrastinators end up procrastinating even more. We send the Internal Revenue Service Form 4868, the official notification that we're going to need six more months to get our tax paperwork in order. You don't have to give Uncle Sam a reason. Believe me, he's heard them all anyway. But you do need to let him know via 4868, either by sending it today so that it's postmarked April 15, or filing it online via Free File or free fillable forms if your adjusted gross income is more than this year's $57,000 income eligibility limit. And be sure to include any tax that you owe with your extension request. Just in case it hasn't been burned into your brain by the more than seven years that I've been saying it here on the ol' blog: Remember, it's an extension to file your tax forms only, not an extension to pay what you owe the U.S. Treasury. If you don't pay your due amount, or at least 90 percent of it, you'll owe more because of penalty charges. So get to work! You still have a few hours to finish your tax return or fill out the one-page Form 4868. (April 15, 2013)