{"id":105,"date":"2012-05-30T23:56:36","date_gmt":"2012-05-30T23:56:36","guid":{"rendered":"https:\/\/ayoub-associates.com\/blog\/?p=105"},"modified":"2012-07-31T04:46:37","modified_gmt":"2012-07-31T04:46:37","slug":"3-last-minute-ways-to-lower-your-tax-bill","status":"publish","type":"post","link":"https:\/\/ayoub-associates.com\/blog\/3-last-minute-ways-to-lower-your-tax-bill\/","title":{"rendered":"3 Last-Minute Ways to Lower Your Tax Bill"},"content":{"rendered":"

 <\/p>\n

Although 2011 is way back in the rearview mirror, it’s still not
\ntoo late to make some moves that will save taxes on last year’s Form 1040 and
\nmaybe on last year’s state income tax return as well. Here are three possibilities.
\n<\/strong><\/p>\n

Choose to Deduct Sales Taxes If You Made Major 2011 Purchases<\/strong><\/p>\n

If you live in a state with low or no personal income taxes, be aware that
\nCongress extended the federal tax deduction for general state and local sales
\ntaxes through 2011. Therefore, you have the option of deducting either state
\nand local sales taxes or state and local income taxes on your 2011 return–but
\nnot both. If you chose to deduct sales taxes, most of you will have to use
\nIRS-provided tables to calculate your sales tax deduction. However, if you’ve
\nhoarded receipts from your 2011 purchases, you can add up your actual sales tax
\namounts and deduct the total if that gives you a better answer. Even if you’re
\nforced to use the IRS table, you can still deduct actual sales taxes from major
\n2011 purchases for things like motor vehicles (including motorcycles, off-road
\nvehicles, and RVs), boats, aircraft, and certain home improvements on top of
\nthe predetermined amount from the table. For details, see the instructions for
\nSchedule A of Form 1040 at the IRS website: www.irs.gov<\/a>.<\/p>\n

Establish SEP for Big 2011 Tax Break<\/strong><\/p>\n

If you’re self-employed and have not yet set up a tax-favored retirement plan
\nfor yourself, you can establish a simplified employee pension (SEP). Unlike
\nother types of small business retirement plans, a SEP can be created this year
\nand still generate a large deduction on last year’s return. In fact, if you extend
\nyour 2011 return to October 15, you’ll have until that late date to take care
\nof the paperwork and make a deductible contribution for last year. The
\ndeductible pay-in can be up to 20% of your 2011 self-employment income or up to
\n25% of your salary if you worked for your own corporation. The absolute maximum
\namount you can contribute for the 2011 tax year is $49,000. To establish a SEP,
\ngo to your bank or brokerage firm and fill out Form 5305-SEP. It takes five
\nminutes. But don’t jump the gun. You may not want a SEP if you have employees,
\nbecause you would probably have to cover them and make contributions to their
\naccounts. That might be too expensive. Bottom line: if you have employees,
\ndon’t start up a SEP without consulting your tax pro.<\/p>\n

Tax Savings Example: If you’re in the 28% federal bracket, a $30,000 SEP
\ncontribution could lower your 2011 tax bill by a cool $8,400 (plus any state
\nincome tax savings). In fact, the tax savings could finance a big chunk of your
\ncontribution.<\/p>\n

Make Deductible IRA Contribution for 2011<\/strong><\/p>\n

If you’ve not made a deductible traditional IRA contribution for the 2011 tax
\nyear, you can do so between now and the tax filing deadline of Tuesday April 17
\nand claim the resulting write-off on your 2011 return. You can potentially make
\na deductible contribution of up to $5,000 — or $6,000 if you were age 50 or
\nolder as of 12\/31\/11. So can your spouse. You must have enough earned income
\nlast year (from jobs, self-employment, or alimony received) to equal or exceed
\nthe amount you contribute to IRAs for the 2011 tax year. The only catch:
\ndeductible IRA contributions are phased out (reduced or eliminated) if last
\nyear’s income was too high. Please see the end of this article for details on
\nthe deduction phase-out rules. The good news: the phase-out ranges are much
\nhigher than just a few years ago.<\/p>\n

Tax Savings Example: If you’re in the 25% federal bracket, a $5,000 deductible
\nIRA contribution between now and April 17 would save you $1,250 in 2011 taxes
\n(plus any state income tax savings). If you and your spouse are both over 50,
\ntwo $6,000 contributions (total of $12,000) would save $3,000 (plus any state
\nincome tax savings).<\/p>\n

Ground Rules for Deductible IRAs<\/strong><\/p>\n

* You, and\/or your spouse if you’re married, must have 2011 earned income at
\nleast equal to what you contribute for 2011.
\n* If you turned 70 1\/2 last year, you can’t make any deductible contribution.
\n* If you’re unmarried and were covered by a retirement plan in 2011, your
\neligibility to make a deductible contribution for last year is phased out
\nbetween adjusted gross income (AGI) of $56,000 and $66,000.
\n* If you’re married and both you and your spouse were covered by retirement
\nplans in 2011, your eligibility to make a deductible contribution for last year
\nis phased out between joint AGI of $90,000 and $110,000. Ditto for your spouse.
\n* If you’re married and only one spouse was covered by a retirement plan in
\n2011, the covered spouse’s eligibility to make a deductible contribution for
\nlast year is phased out between joint AGI of $90,000 and $110,000. The
\nnon-covered spouse’s eligibility is phased out between AGI of $169,000 and
\n$179,000.<\/p>\n

By <\/cite>Bill Bischoff<\/em> | <\/cite>SmartMoney<\/em> <\/cite><\/p>\n","protected":false},"excerpt":{"rendered":"

  Although 2011 is way back in the rearview mirror, it’s still not too late to make some moves that will save taxes on last year’s Form 1040 and maybe […]<\/p>\n","protected":false},"author":88890,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,3],"tags":[],"class_list":["post-105","post","type-post","status-publish","format-standard","hentry","category-business","category-tax-tips"],"yoast_head":"\n3 Last-Minute Ways to Lower Your Tax Bill - Ayoub Sidhum & Co.<\/title>\n<meta name=\"description\" content=\"Ayoub and Associates CPA Firm is a full service Corona CPA firm that provides services in accounting, tax preparation and planning, IRS audit, and sales tax. 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