IRS reminds taxpayers: time running out to make 2011 tax movesThe Internal Revenue Service reminds taxpayers that 2011 is quickly nearing an end and it will soon be time to file their tax returns in 2012.
The Internal Revenue Service reminds taxpayers that 2011 is quickly nearing an end and it will soon be time to file their tax returns in 2012.
"In order to claim certain benefits on your 2011 taxes, you must act no later than Dec. 31," said IRS spokesperson Carrie Resch. "Action now could save you money later."
Resch also cautioned taxpayers that tax scams may increase as the tax filing season approaches. "The IRS never initiates contact by e-mail," Resch said. "Most e-mails that appear to be from the IRS are scams and should be forwarded to email@example.com."
Here are some tips about tax benefits that require action before the year ends:
1. Make Charitable Contributions -- Donations must be made to qualified charities no later than Dec. 31 to be deductible for 2011. You must have a canceled check, a bank or credit card statement or a written communication from the charity showing the name of the organization and the date and amount of the contribution. Donations charged to a credit card by Dec. 31 are deductible for 2011 even if the bill isn’t paid until 2012. Non-cash contributions, such as clothing or furniture, must be in at least good used condition to be deductible and you need a receipt from the organization.
2. Make Energy-Efficient Home Improvements -- Here's a move that can lower your energy costs and save you tax dollars. The home-energy tax credit is worth ten percent of the cost of new windows, doors, water heaters, insulation and heating and air conditioning systems, up to a maximum of $500. The upgrades must be installed by Dec. 31 in order to claim the credit for 2011. See details at www.energystar.gov
3. Contribute the Maximum to Retirement Accounts -- To count for 2011, elective deferrals to employer-sponsored 401(k) plans or similar workplace programs must be made by Dec. 31. However, you have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still have it count for 2011. For 2011, you can contribute up to $5,000 to a traditional IRA, up to $11,500 to a Simple IRA and up to $16,500 to a 401(k) employer plan. If you’re 50 or older, those limits increase for the "catch-up" provision. The Saver’s Credit for lower-income workers can reduce your income tax dollar-for-dollar up to $2,000 for workers who voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs.
4. Give a Gift – Taxpayers can give a gift worth up to $13,000 in cash or property by Dec. 31, 2011 to another person without having to file a gift tax return. Gifts to individuals are not deductible by the donor and generally are not taxable to the recipient.
5. Sell the Losers – Check investments and consider a portfolio adjustment by Dec. 31. Taxpayers can deduct capital losses up to the amount of capital gains plus $3,000.
6. Take Required Minimum IRA Distribution – A taxpayer age 70 and a half or older who has an IRA must take a 2011 required minimum distribution (RMD) from their IRA before Jan. 1, 2012. This requirement was suspended for 2009 but is in effect for 2010 and 2011. Taxpayers who fail to take an RMD may be charged a penalty.
7. Name Changed? Update with SSA Before You File Taxes -- If you married or divorced in 2011, make sure you report any name change to the Social Security Administration before you file your tax return. A mismatch could delay your refund. Visit the SSA website at www.socialsecurity.gov
8. Get Sales Tax Deduction for Certain Big-Ticket Purchases – This tax break allows taxpayers who itemize their deductions to deduct state and local sales taxes paid for 2011 in lieu of state income taxes paid. If you're considering buying certain big-ticket items -- such as a motor vehicle, boat, aircraft or mobile home -- you may consider doing so by Dec. 31, as the sales taxes paid on those purchases can be added to the deduction from the IRS sales tax tables. Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans and off-road vehicles. This benefit also may apply to sales taxes paid on a substantial addition to or major renovation of a home.
9. Adjust Your Tax Withholding for 2012 -- If you wrote a sizable check to the IRS earlier this year, or if your tax refund was a big one and you’d rather see more money in each paycheck instead of waiting for a big refund, you can adjust your 2012 withholding rate. If you’re an employee, the Withholding Calculator on www.IRS.gov
10. Make Tax Payment Arrangements -- If 2011 was tough for you financially and you're wondering how you'll pay taxes that are due, contact the Internal Revenue Service now and you may be able to breathe easier in the new year. The IRS announced the new Fresh Start program in 2011 that offers relief to many individuals and small businesses struggling to pay their taxes. Find out more at IRS.gov by using keywords "Fresh Start" in the search box.
Find the latest in federal tax information and services at www.IRS.gov