As the end of tax season draws near and the major league baseball season gets into full swing, approximately 30% of American taxpayers are yet to file their taxes. In fact, it can be argued that tax procrastination has supplanted baseball as our national pastime. So, if you are one of those that are stressing through gathering your paperwork, you are not alone. You may have even blown it off completely to attend your favorite team’s opening day. With this year’s opening day average attendance around baseball at 42,830, chances are you sat in the stands with about 13,000 fellow procrastinators. But don’t get caught looking at some important tax benefits like a 12 to 6 curve-ball.
Here are a few last minute tax tips to remember while you are in tax frenzy:
Fund an IRA
- You have until the April 15th filing deadline to contribute up to $5,500 to a traditional IRA ($6,500 if over 50) and claim it on your 2014 return, subject to your income and whether or not you are covered by your retirement plan at work.
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- You may also be entitled to the “Saver’s Credit” if your income as a single filer is less than $30,000 ($60,000 filing jointly). The maximum credit is $1,000 ($2,000 if filing jointly).
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Education Tuition Benefits
- American Opportunity Tax Credit (AOTC) – applies to the first four years at an eligible college or vocational school and can be worth up to $2,500 per student (100% of the first $2,000 of expenses and 25% of the next $2,000). Eligible costs include tuition, books, and required fees, and supplies (books and supplies must be paid directly to the school). The credit phases out once your income exceeds $90,000 ($180,000 for joint filers).
- Lifetime Learning Credit (LLC) – Available for an unlimited number of years (hence, Lifetime) and does not need to lead to a degree. The credit is up to 20% of $10,000 of qualifying expenses for those with income up to $64,000 ($128,000 filing jointly).
- Tuition and Fees Deduction (TFD) – can deduct up to $4,000 for undergraduate and graduate school (but not books or supplies) if your income is less than $80,000 ($160,000 filing jointly). Unlike the AOTC and LLC, this is an above-the-line deduction to arrive at adjusted gross income, not a credit.
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- You will receive a Form 1098-T from the school attended, but it will most likely not include other costs such as fees, books and supplies. You will need to keep track of your receipts.
- In order to obtain the biggest bang for your buck, you will need to calculate your tax liability for each of the above alternatives for which you are eligible and select the one that minimizes your tax liability.
- Don’t forget about possible state tax benefits such as New York’s College Tuition Tax Credit or the College Tuition Itemized Deduction.
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Student Loan Interest
- OK, so you’ve finished school and now have a real job. But what about the student loans you’re paying? You can deduct up to $2,500 of the interest paid on student loans as an above-the-line deduction as long as your income is less than $80,000 ($160,000 if filing jointly). Such interest is reported to by your lender on Form 1098-E.
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- Your lender is only required to send you a 1098-E if the interest exceeds $600; so you may need to contact them to obtain the interest amounts if you have several small loans with various financial institutions.
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New York 529 Deduction
- New York resident taxpayers can deduct up to $5,000 ($10,000 for married couples filing jointly) of contributions to a qualified college savings 529 plan.
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- Since there is no current federal benefit for 529 contributions, taxpayers often overlook this state deduction.
- Assets in the plan grow tax-deferred; withdrawals are exempt from federal tax to the extent that they are used for qualified higher education.
- To ensure state tax benefits, you should generally invest in your resident state’s 529 plan.
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Business Expenses
- Self-employed business travelers can deduct airline baggage checking fees in connection with business travel.
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- You must maintain records to document the business purpose of your trip.
- Employees may be able to claim unreimbursed baggage fees as a miscellaneous deduction as long as they exceed 2% of their adjusted gross income.
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Dependent Care Credit
- You may be entitled to claim the cost of day care for child under the age of 13 up to $3,000 ($6,000 for two or more children). The credit ranges between 20% and 35% of qualifying expenses, depending on your income.
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- You may be able to claim the cost of summer day camp as an expense for a child and dependent care credit (Overnight camps do not qualify).
- Both parents must work or be looking for work.
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Unclaimed Refunds
- Part-time workers and students are the most likely to be among those who do not file returns to claim a refund. The IRS allows you to claim refunds for up to three years from the original due date of your return with extensions.
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- You have until April 15th to claim your 2011 refund if you did not file an extension for that year.
- You have until October 15th to claim your 2011 refund if you filed an extension for that year.
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Employees Who Worked for More than One Employer
- If you worked for more than one employer in 2014 and earned more than $117,000, you may have paid too much Social Security tax.
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- You can claim a refund on Form 1040 for any excess Social Security withholdings.
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Last but Not Least
- Here a few more things to remember:
- Medical miles and transportation costs.
- Points paid on a mortgage to acquire a residence or to refinance.
- Mileage and other expenses associated with volunteer work (but not the cost of your labor or services).
- Sales taxes if they exceed your state and local income taxes, or if there is no state or local income tax (i.e. Florida, Texas etc.).
- Sales tax incurred on specific large purchases such as a car or a boat.
For Professional Procrastinators Only
- File an automatic six month extension before April 15th.
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- It is an extension of time to file, not to pay.
- If you expect to owe taxes, they are due on April 15th to avoid penalties and interest.
- If you cannot afford to pay the entire balance, pay what you can and make arrangements with the IRS (i.e. an installment agreement) to pay the balance.
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For more information, please contact Victor C. Belgiorno at 516-861-3704 or or Bob Jahelka at 516-861-3707 or .