Accounting Advocate for Individuals and Businesses

Rockin' tax tips

TAX TIP #117-TAX SAVING IDEAS FOR YOUR 2015 TAX RETURN

Though it’s true that most money-saving options to defer income or accelerate deductions become much more limited after December 31, there is still a lot you can do.

Make an Estimated Tax Payment

If you didn’t pay enough to the IRS during the year, you may have a big tax bill staring you in the face. Plus, you might owe significant interest and penalties, too.

How could that happen? Withholding on your paycheck may be out of whack, or you may have received a big gain from selling stock. According to IRS rules, you must pay 100 percent of last year’s tax liability or 90 percent of this year’s tax or you will owe an underpayment penalty. If your adjusted gross income for 2014 was more than $150,000, you have to pay more than 110 percent of your 2015 tax liability to be protected from a 2015 underpayment penalty. If you make an estimated payment by January 15, though, you can erase any penalty for the fourth quarter, but you still will owe a penalty for earlier quarters if you did not send in any estimated payments back then. But if your income windfall arrived after August 31, 2015, you can file Form 2210: Underpayment of Estimated Tax to annualize your estimated tax liability, and possibly reduce any extra charges.

Itemize Your Tax Deductions

It’s easier to take the standard deduction, but you will owe less tax, especially if you are self-employed, own a home or live in a high-tax area. It’s worth the bother when your qualified expenses add up to more than the 2015 standard deduction of $6,300 for singles and $12,600 for married couples filing jointly. Don’t forget overlook miscellaneous expenses, which are deductible if the combined amount adds up to more than two percent of your adjusted gross income. These deductions include tax-preparation fees, job-hunting expenses, business car expenses and professional dues. You can also deduct the portion of medical expenses that exceed 10 percent of your adjusted gross income.

There is a temporary exemption from January 1, 2013 to December 31, 2016 for individuals age 65 and older and their spouses. If you or your spouse are 65 years or older or turned 65 during the tax year you are allowed to deduct unreimbursed medical care expenses that exceed 7.5 percent of your adjusted gross income. The threshold remains at 7.5 percent of AGI for those taxpayers until December 31, 2016.