In December’s issue of The Woodland’s Living Magazine, I am publishing some “tax tips” for 2009 tax planning.  I’m giving you the opportunity to read them first here!

1. You should spend extra time reviewing the following which top the IRS’s list of common tax return mistakes: incorrect/trasposed social security numbers, incorrect or misspelled names (the name must match the social security card exactly), incorrect bank account numbers for direct deposit (this could hold up your refund or send it into someone else’s account!), forgetting to sign and date returns, and mathematical errors (when preparing a return the “old fashioned” way).
2. When figuring stock sale gains/losses, don’t forget to factor in dividends from prior years where the dividends are reinvested (you’ve already paid tax on this money and it should be added to the original purchase price for purposes of calculating taxable gains or losses).  Too many people pay the IRS twice when they shouldn’t!
3. Check your 2009 tax withholding: With the Make Work Pay Credit, many taxpayers saw a reduction in their taxes withheld on paychecks, but this may lead to a surprise come April 15^th.  If you are in the following groups, you may want to review your withholding rates to ensure enough tax is withheld: you work multiple jobs, both you and your spouse work, and/or you can be claimed as a dependent on another taxpayer’s return.
4. The American Recovery and Reinvestment Act of 2009 (ARRA) created some tax benefits Small Businesses can take advantage of, but may not know about: increased deductions for equipment such as computers and machinery and tax credits for hiring unemployed veterans and disadvantaged youths.
5. New Roth conversion rules for 2010: Beginning in 2010, the income limitations around converting Traditional IRAs to Roths are gone.  Anyone, regardless of income, can convert a Traditional, Rollover (401Ks from previous employers rolled into a Traditional IRA), SEP (Simplified Employee Pension), and SIMPLE IRAs to a Roth.  There are situations where it may not make sense to convert, so you should consult with a tax advisor to review your individual scenario.
6. The American Recovery and Reinvestment Act of 2009 (ARRA) increased the tax credits available (30% of the cost up to $1,500) for implementing qualifying energy efficient improvements, such as energy efficient exterior windows, into your primary residence during 2009 AND 2010.
7. The IRS and State Revenue Departments do make mistakes.  Even if you receive a letter stating that you owe more in taxes because they determined that there is a discrepancy on your return, review it closely (or have a tax advisor review it for you).  THEY may have made the error when transferring the return into their software.  Each year, I see many taxpayers who receive correspondence from the Tax Departments, but rarely do they actually owe any additional tax.
8. Do you have a small business that turns a taxable profit every year?  Are you taking advantage of tax deferred retirement savings?  If not, you should.  Not only will it help you on your tax bill, but you will be saving for your future.  In some instances, you may be able to defer up to 20% – 25% of your business income (depending on your business structure) to a maximum of $49,000. 

Hope this helps!  If you would like to discuss any of these (or any other tax matter) in more detail, please feel free to give me a call!

About the author: Shannon Pope is a CPA serving North Houston from The Woodlands, TX to Kingwood, TX.  For more information on her background and services offered, please visit the website www.shannonpopecpa.com.

The information contained herein is general in nature and provided for informational purposes only.  It is not intended or provided to constitute tax or legal advice or to be used for (a) avoiding any tax related penalties that may be imposed on you or any other person/entity under the Internal Revenue Code, or (b). promoting, marketing or recommending to another person any transaction or matter addressed in this communication. Please consult with your CPA and/or attorney regarding your specific legal or tax situation. Please contact us if you with to have formal written advice on this or any other matter.