Income Tax Day Loopholes, Tips for You

Ten Quick Tips and Ideas to Help You Save Money at IRS Time
By TROY MCMULLEN and SCOTT MAYEROWITZ

It's among the most dreaded days of the year for millions of Americans and it's fasting approaching. With distractions such as the Super Bowl and Olympics behind them, Americans rich and poor will begin their final assault on their taxes. Though April 15 is the official deadline to file income taxes, unless the IRS grants an extension, Americans have begun the yearly ritual of sitting at their kitchen tables calculating taxable incomes and yearly deductions.

"The prospect of a healthy refund typically spurs many of us to get to work sooner rather than later to do our taxes," says Cindy Hockenberry, a research coordinator for the National Association of Tax Professionals, a nonprofit professional group. "This year more people than ever are looking to get refunds."

While the majority of Americans strive to submit their tax returns ahead of the April 15 deadline, the IRS estimates that at least 20 million - one in seven tax filers will wait until the final week. That includes Americans who line up at the local post office or those who click their mouse buttons through tax software or the IRS' own electronic tax forms.

That's especially true for the rising tide of unemployed in America for whom tax time often can be frustrating and confusing.

"You're seeing a trend where more people have shifted from being full-time employees to part-time or freelancers," says Adam Gottlieb, a certified public accountant with Martin Cohen CPA, a Manhattan firm that offers accounting, tax and small business consulting services. "That's a direct result of this economy."

For those who still haven't filed their taxes, ABCNews.com has compiled a list of tips on deductions and time-saving tax tricks.

1. File online for free. No matter what your income, you can file your tax returns online for free through the IRS Web site at www.irs.gov.

Those who have an adjusted gross income of $57,000 or less in 2009 can also qualify for free software for step-by-step help.

If you're eligible for a tax refund, filing electronically will help you get that cash much more quickly than mailing in your returns.

2. File for a tax extension but get ready to pay. If you just can't get your returns finished in time, file an extension. Everyone is eligible for an extension, which allows taxpayers six more months - until Oct. 15 - to file returns and millions of Americans take advantage of extensions every year.

The bad news is that, like tax returns, extension requests are also due April 15, and filing one doesn't mean you get more time to pay your taxes. It just means you get more time to finish your paperwork. Taxpayers filing extension requests must still estimate roughly how much they owe the IRS (if anything) and send a check for that amount by April 15.

3. Don't pay too little. If you're in a hurry and filing an extension, a good way to determine how much you owe is to use last year's tax filings as your guide. Given the beating that the recession has had on many people's income and investments, if you owe money, chances are you owe less than last year.

But don't drop your estimate too much: If the IRS finds you haven't paid enough, you'll face fees and penalties.

Last year's tax returns will be less helpful if you've had a major life change, like purchasing a house or switching jobs. In that situation, it might be best to consult a tax professional.

4. Standard deductions make for quick filings. If your financial life isn't a complicated one -- you don't pay interest on a home mortgage, you don't make large charitable contributions, etc. -- you can get your taxes done quickly by filing for a standard deduction instead of itemizing deductions.

For 2009 returns, the standard deduction for single individuals is $5,700; for married couples, it's $11,400. Additional standard deductions apply for those over age 65 and the blind.

5. Don't forget the new real estate tax deduction. There's a new standard tax deduction for homeowners. They can add a standard deduction of up to $1,000 if they pay real estate taxes. This will prove especially beneficial to homeowners who have paid off their mortgages and don't deduct mortgage interest payments from their taxes.

And, if you were a first-time home buyer in 2009, you may be eligible for a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence and a tax credit of up to $6,500 for qualified repeat home buyers.

6. Deduct job-hunting expenses. If you were laid off in the past year, most of the expenses incurred while looking for a job can be deducted from your taxes, so carefully track these expenses. For example, any money you spent on creating and mailing your resume is deductible.

You can also deduct expenditures for career coaches and headhunters. You can even deduct long distance or cell phone charges related to the job search, as well as travel expenses incurred for interviews, including mileage.

7. More easy-to-miss deductions and credits. Parents who paid their children's college tuition in 2009 can deduct up to $4,000; teachers who paid for books or other classroom supplies can deduct up to $250; and if you bought a hybrid car or truck, you're eligible for a conservation tax credit of between $250 and $1,000. Depending on the make of your new car, you could also get a fuel economy credit of $400 to $2,400.

8. Add to your retirement savings quickly and easily. When filing your tax returns electronically, the IRS allows you to designate which accounts it should transfer your refund to. You can opt to have part or all of your refund transferred to your Individual Retirement Account (IRA).

9. Don't forget random sources of income. Did you get paid for jury duty? That must be reported in your taxes. Did you have an interest-bearing bank account that you closed sometime in 2009? That interest income should be reported too. 10. Take advantage of a tax payment plan. In this recession, unfortunately, many Americas don't have enough money to put food on their tables, let alone pay the IRS. There is a payment plan option, but it comes with several strings: You may qualify if your tax bill is less than $25,000 and can be paid off within five years.