In effect, you’re giving the government an interest-free loan.

2. If you have too little withheld, you may be charged an underpayment penalty.

You must pay 90% of what you owe for the tax year by the end of that year or an amount equal to 100% of your tax liability for the previous tax year, whichever is smaller.

3. Not every dollar of your taxable income is taxed at the same rate.

That’s because portions of your earned income fall into different brackets, which are assigned different tax rates. Generally speaking, the first dollar you make will be taxed at a lower rate than your last dollar. Your marginal tax rate is the tax bracket at which the highest (or last) portion of your income is taxed.

4. Your combined tax bracket determines how much tax you’ll owe on income from investments such as CDs and money market funds.

Your combined bracket is the sum of your top (or marginal) federal tax rate and your top state income tax rate. It may be less if you itemize deductions since you will be able to deduct your state income tax on your federal return.

5. If you file your return by April 15, but don’t pay the tax you owe, you may receive a late payment penalty.

The same goes if you file for an extension. An extension only allows you to file your return after the due date. But full payment is still required by April 15. If you make a partial payment by then, you may be charged interest on the amount outstanding.

6. You can reduce your chances of being audited.

One of the best ways is to fill out your return completely, correctly, and on time every year.

7. You should pay estimated taxes if you’re self-employed; expect hefty investment income or profits from a property sale; or if you don’t have enough taxes withheld to cover the taxes you’ll owe on non-wage-related income.

Retirees should also consider paying them if they haven’t opted for voluntary withholding on their pension or IRA payments. Estimated taxes are due four times a year (April 15, June 15, Sept. 15, and Jan. 15).

8. Your adjusted gross income (AGI) is your total income minus certain “above the line” deductions such as deductible IRA contributions, alimony payments, or health savings account contributions.

Your AGI primarily determines whether or not you’re eligible for tax breaks. Almost every break, be it a deduction, exemption, or a credit, has its own AGI limit.

9. Your taxable income is your AGI minus exemptions and deductions.

The less your taxable income, the less in taxes you’ll owe. That’s why it’s in your best interest to take advantage of tax breaks where you can.

10. A credit is better than a deduction.

A credit is a dollar-for-dollar reduction of the taxes you owe. A $100 credit means you pay $100 less in taxes. A deduction reduces the taxes you owe by a percent of every dollar you’re allowed to deduct.

You calculate the worth of your deduction by multiplying your marginal (or top) tax rate by the amount of the deduction. If you’re in the 25% tax bracket, a $100 deduction means you’ll pay $25 less in taxes (0.25 times $100).

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• Job Seekers: Expenses related to job seeking can be a legitimate deduction on your taxes. Qualified expenses include phone calls, unemployment agency fees, resume preparation costs, travel and transportation fees, and career counseling services.
• Teachers: Any classroom related expenses such as books, computer equipment (including software and services), supplies, and other materials used in the classroom are legitimate deductions. Save your receipts!
• Home Office: If your home has a space solely dedicated to use as a home office, depreciations in home office equipment, computer expenses (if solely used for business purposes), and even the percentage of heat and electricity used by your home office are qualified deductions.
• Charitable Contributions: Any donation you make to a legally recognized charity is tax deductible, as long as it meets IRS standards. Double check charitable organizations to which you have donated to ensure they qualify.
• Military Personnel: Active military personnel qualify for many legitimate deductions regarding travel, uniforms, and educational expenses. Check with your tax professional to see which write-offs you can claim.
• First Time Home Buyer: As a first time home buyer, expenses such as property taxes and mortgage interest are legitimate deductions on your tax return.
• Energy Efficiency: Tax credits for using energy efficient appliances and heating systems are deductible in addition to alternative energy systems such as solar panels, wind turbines, and residential fuel cells. Energy saving home improvements such as insulation, lighting, windows, and roofs also qualify.

Identifying and claiming these additional tax write-offs positions the educated taxpayer for a greater return come April. Make sure you are claiming every possible deduction and limit the amount of money you shell out to Uncle Sam.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

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The simplest donation is of course cash. Most non-profit charitable organizations qualify. Keep all your receipts to make sure your itemized donation deductions are accurate. In addition to cash, property donations such as clothing, books, land, and even cars qualify.

The general rule of thumb is to deduct the fair market value of the item, although the rules for donating cars have changed recently from fair market value being determined by a blue book value, to the actual price the car is sold for at auction. For donations of cash or property under $250, merely holding on to the receipt is enough to qualify for a deduction. If the donation is between $250 and $5,000, you will need to explain how you received the property, when you received/created it, and your cost basis for the deduction. If the donation is over $5,000, then you will need a qualified written appraisal of the property in addition to everything else.

Look around your home today to identify items that may qualify for a donation deduction. Not only will you be helping charitable organizations continue to help those in need, but you can hold on to some of your hard earned money at the same time.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

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Many programs offered by today’s leading debt settlement companies allow clients to build funds in an F.D.I.C. insured special purpose savings account through a structured monthly budget. Once these funds have grown to an adequate level, the debt settlement company will then negotiate with creditors on the client’s behalf to settle outstanding accounts for a portion of the amount owed. The quicker these funds accumulate, the faster the debt settlement company can help clients settle their unsecured debt.

Although tax refunds can be a great way to pay for that next vacation or put a down payment on a new car, the most effective use of the money for a debt settlement client is to place it in their structured savings account. This allows the debt settlement company the opportunity to negotiate with creditors and use the funds to settle additional accounts, placing you that much further down the road towards financial independence.

So the next time you cringe at the amount of taxes being withheld from your paycheck, think of it as a form of debt resolution. In the long run, using this money to pay down your debts can bring you that much closer to the day you can finally say “I am debt free!”

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As specialists in the specific laws, guidelines, and loopholes that can be found in the complicated U.S. taxation system, qualified tax preparers stand a greater chance of helping you optimize your annual tax return. In fact, according to the Government Accountability Office (GAO), an average savings of $438 is found through the use of a licensed tax preparer versus do-it-yourself filing. 

Perhaps the greatest way licensed tax preparers can help optimize your tax return is by helping you itemize your tax deductions, rather than simply listing the standard deduction for your tax bracket. Itemizing each specific deduction allows you to qualify for additional tax breaks that your preparer will identify according to your unique personal information and situation.

Additionally, tax preparers greatly reduce the risk of making errors on your tax form which can greatly affect the outcome of your return. See below for a list of the most common tax return errors a licensed tax preparer can help eliminate:

• Claiming the Wrong Filing Status: Claiming the wrong status could ruin your eligibility for the child tax credit, the earned-income credit, and exemptions for dependents.
• Omitting or Using Incorrect Social Security Numbers: The Social Security numbers you list for your dependents, the earned-income credit, and the child tax credit must match your dependents’ Social Security cards. Otherwise, the IRS will reject your credits and deductions.
• Failing To Use Correct Forms and Schedules: Think of the IRS as a vast bureaucracy that responds to the directives of an outdated computer system for audit direction. Using the correct forms for all your deductions is crucial for an optimal return.
• Failing To Sign and Date the Return: Technically, if you don’t sign the return, you haven’t filed. And, if you haven’t filed, you’re going to be subject to all kinds of penalties, not to mention interest on any amounts not paid in full. Don’t forget, both spouses MUST sign a joint return.
• Claiming Ineligible Dependents: When the IRS started requiring Social Security numbers for claimed dependents, millions of dependents disappeared. In any case, the qualification criteria to claim a dependent are very specific.
• Not Using the Earned-Income Credit: Unfortunately, because it is one of the most convoluted provisions in our tax code, the IRS reports failure to claim the earned-income credit as one of its top taxpayer mistakes.
• Failing To Report All Income: Not all income is reported on a W-2 form or a 1099. The fact that there’s no reporting to the IRS doesn’t prevent the agency from auditing your receipts and reconciling your bank deposits with your reported income. Unreported income can even lead to civil and criminal sanctions.
• Failing To Check For the Alternative Minimum Tax: The AMT, or “Awfully Mean Tax” as the industry refers to it, was created to catch high-income taxpayers who used allowable deductions and credits to greatly reduce their tax liability. Unfortunately, because it hasn’t been updated to reflect inflation since the original bill was passed, the AMT was projected to hit about 19 million families in 2007.

In addition, most reputable tax preparers offer some form of protection or guarantee of an accurate return. Coupled with increased chances for a greater return, the use of a licensed tax preparer can have huge returns for most individuals and families.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

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Good news! Some welcome relief is in the works, courtesy of the U.S. government.

At the beginning of May, the Federal Reserve Board proposed a set of new regulations that would help to protect consumers against the aforementioned practices and a number of others considered to be unfair. These rules, proposed for public comment under the Federal Trade Commission Act, are a follow-up to the board’s 2007 proposal for improving credit card disclosures under the Truth in Lending Act.

The proposal includes five major protections for credit card users. (Note that although we’ll use the term “bank” throughout, these rules would also apply to other institutions such as savings associations and federally chartered credit unions.)

1. Rates on Preexisting Balances — Banks would be prohibited from increasing the APR on a preexisting balance (except under certain limited circumstances), and would have to permit the consumer to pay off that balance over a reasonable period of time.
2. Above-Minimum Payments — Banks would not be permitted to apply payments over the minimum in a way that maximizes interest charges.
3. Discounted Promotional Rates — Banks would be required to extend the full benefit of discounted promotional rates by (1) applying payments over the minimum to any higher-rate balances; and (2) offering a grace period for purchases for which the consumer is otherwise eligible.
4. “Two-Cycle” Billing — Banks would be prohibited from assessing interest charges using the “two-cycle” method, which calculates interest on balances on days in billing cycles preceding the most recent one. (In effect, the cardholder gets hit with a double whammy because interest is charged retroactively to the date of purchase—even if it’s the month before.)
5. Reasonable Payment Time — Banks would have to give consumers a reasonable amount of time to make payments.

Also included are regulations affecting payment of deposit account overdrafts, whether they’re created by a check, an ATM withdrawal, a debit card purchase, or some other type of transaction. Financial institutions would be required to provide consumers with notice and an opportunity to opt out of overdraft payments.

According to a Federal Reserve Board member, these and other proposed rules “would provide the benefits of substantial protection against practices that can harm consumers.” At a time when consumers are under relentless financial pressure on so many fronts, it’s reassuring to know that someone is watching our backs.

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Airline Fares

1. Compare low-cost carriers with major carriers that fly to your destination. Remember, the best fares may not be out of the airport closest to you.

2. You may save by including a Saturday evening stay-over or by purchasing the ticket at least 14 days in advance. Ask which days of the week and times of the day have the lowest fare.

3. Even if you are using a travel agent, check airline and Internet travel sites, and look for special deals. If you call, always ask for the lowest fare to your destination.

Car Rental

4. Since car rental rates can vary greatly, compare total price (including taxes and surcharge) and take advantage of any special offers and membership discounts.

5. Rental car companies offer various insurance and waiver options. Check with your automobile insurance agent and credit card company in advance to avoid duplicating any coverage you may already have.

New Cars

6. You can save thousands of dollars over the lifetime of a car by selecting a model that combines a low purchase price with low depreciation, financing, insurance, gasoline, maintenance, and repair costs. Ask your local librarian for new car guides that contain this information.

7. Having selected a model and options you are interested in, you can save hundreds of dollars by comparison shopping. Get price quotes from several dealers (over the phone or Internet) and let each know you are contacting the others.

8. Remember there is no “cooling off” period on new car sales. Once you have signed a contract, you are obligated to buy the car.

Used Cars

9. Before buying any used car:

Compare the seller’s asking price with the average retail price in a “bluebook” or other guide to car prices which can be found at many libraries, banks, and credit unions.

Have a mechanic you trust check the car, especially if the car is sold “as is.”

10. Consider purchasing a used car from an individual you know and trust. They are more likely than other sellers to charge a lower price and point out any problems with the car.

Auto Leasing

11. Don’t decide to lease a car just because the payments are lower than on a traditional auto loan. The leasing payments are lower because you don’t actually own the car.

12. Leasing a car is very complicated. When shopping, consider the price of the car (known as the capitalized cost), your trade-in allowance, any down payment, monthly payments, various fees (excess mileage, excess “wear and tear,” end-of- lease), and the cost of buying the car at the end of the lease. A valuable source of information about auto leasing can be found in Keys to Vehicle Leasing: A Consumer Guide, which is published by the Federal Reserve Board and Federal Trade Commission.

Gasoline

13. You can save hundreds of dollars a year by comparing prices at different stations, pumping gas yourself, and using the lowest-octane called for in your owner’s manual.

14. You can save up to $100 a year on gas by keeping your engine tuned and your tires inflated to their proper pressure.

Car Repairs

15. Consumers lose billions of dollars each year on unneeded or poorly done car repairs. The most important step that you can take to save money on these repairs is to find a skilled, honest mechanic. Before you need repairs, look for a mechanic who:

-is certified and well established;

-has done good work for someone you know; and

-communicates well about repair options and costs.

Auto Insurance

16. You can save several hundred dollars a year by purchasing auto insurance from a licensed, low-price insurer. Call your state insurance department for a publication showing typical prices charged by different companies. Then call at least four of the lowest-priced, licensed insurers to learn what they would charge you for the same coverage.

17. Talk to your agent or insurer about raising your deductibles on collision and comprehensive coverage to at least $500 or, if you have an old car, dropping this coverage altogether. This can save you hundreds of dollars on insurance premiums.

18. Make certain that your new policy is in effect before dropping your old one.

Homeowner/Renter Insurance

19. You can save several hundred dollars a year on homeowner insurance and up to $50 a year on renter insurance by purchasing insurance from a low-price, licensed insurer. Ask your state insurance department for a publication showing typical prices charged by different licensed companies. Then call at least four of the lowest priced insurers to learn what they would charge you. If such a publication is not available, it is even more important to call at least four insurers for price quotes.

20. Make certain you purchase enough coverage to replace the house and its contents. “Replacement” on the house means rebuilding to its current condition.

21. Make certain your new policy is in effect before dropping your old one.

Life Insurance

22. If you want insurance protection only, and not a savings and investment product, buy a term life insurance policy.

23. If you want to buy a whole life, universal life, or other cash value policy, plan to hold it for at least 15 years. Canceling these policies after only a few years can more than double your life insurance costs.

24. Check the National Association of Insurance Commissioners website (www.naic.org/cis) or your local library for information on the financial soundness of insurance companies.

Checking Accounts and Debit Cards

25. You can save more than $100 a year in fees by selecting a free checking account or one with no minimum balance requirement. Request a complete list of fees that are charged on these accounts, including ATM and debit card fees.

26. See if you can get free or lower cost checking through direct deposit or agreeing to ATM only use. Be aware of charges for using an ATM not associated with your financial institution.

Savings Products

27. Before opening a savings account, find out whether the account is insured by the federal government (FDIC for banks or NCUA for credit unions). Financial institutions offer a number of products, such as mutual funds and annuities, which are not insured.

28. Once you select a type of savings account, use the telephone, newspaper, and Internet to compare rates and fees offered by different financial institutions-including those outside your city. These rates can vary a lot and, over time, can significantly affect interest earnings.

29. To earn the highest return on savings (annual percentage yield) with little or no risk, consider certificates of deposit (CDs) or U.S. Savings Bonds (Series I or EE).

Credit Cards

30. To avoid late payment fees and possible interest rate increases on your credit cards, make sure you send in your payment a week to ten days before the statement due date. Late payments on one card can increase fees and interest rates on other cards.

31. You can avoid interest charges, which may be considerable, by paying off your entire bill each month. If you are unable to pay off a large balance, pay as much as you can. Try to shift the remaining balance to a credit card with a lower annual percentage rate (APR). You can find listings of credit card plans, rates, and terms on the Internet, in personal finance magazines, and in newspapers.

32. Be aware that credit cards with rebates, cash back, travel awards, or other perks may carry higher rates or fees.

Auto Loans

33. To save as much as several thousand dollars in finance charges, pay for the car in cash or make a large down payment. Always get the shortest term loan possible as this will lower your interest rate.

34. Make certain to get a rate quote (or pre-approved loan) from your bank or credit union before seeking dealer financing. You can save as much as $1000 in finance charges by shopping for the cheapest loan.

35. Make certain to consider the dollar difference between low-rate financing and a lower sale price. Remember that getting zero or low-rate financing from a dealer may prevent you from getting the rebate.

First Mortgage Loans

36. Although your monthly payment may be higher, you can save tens of thousands of dollars in interest charges by shopping for the shortest-term mortgage you can afford. For each $100,000 you borrow at a 7% annual percentage rate (APR), for example, you will pay over $75,000 less in interest on a 15-year fixed rate mortgage than you would on a 30-year fixed rate mortgage.

37. You can save thousands of dollars in interest charges by shopping for the lowest-rate mortgage with the fewest points. On a 15-year $100,000 fixed-rate mortgage, just lowering the APR from 7% to 6.5% can save you more than $5,000 in interest charges over the life of the loan, and paying two points instead of three would save you an additional $1,000.

38. Check the Internet or your local newspaper for mortgage rate surveys, then call several lenders for information about their rates (APRs), points, and fees. If you choose a mortgage broker, make certain to compare their offers with those of direct lenders.

39. Be aware that the interest rate on most adjustable rate mortgages (ARMs) can vary a great deal over the lifetime of the loan. An increase of several percentage points might raise payments by hundreds of dollars a month, so ask the lender what the highest possible monthly payment might be.

Mortgage Refinancing

40. Consider refinancing your mortgage if you can get a rate that is lower than your existing mortgage rate and plan to keep the new mortgage for at least several years. Calculate precisely how much your new mortgage (including points, fees and closing costs) will cost and whether, in the long run, it will cost less than your current mortgage.

Home Equity Loans

41. Be cautious in taking out home equity loans. The loans reduce or may even eliminate the equity that you have built up in your home. (Equity is the cash you would have if you sold your house and paid off your mortgage loans.) If you are unable to make payments on home equity loans, you could lose your home.

42. Compare home equity loans offered by at least four reputable lending institutions. Consider the interest rate on the loan and the annual percentage rate (APR), which includes other costs, such as origination fees, discount points, mortgage insurance, and other fees. Ask if the rate changes, and if so, how it is calculated and how frequently, as this will affect the amount of your monthly payments.

Home Purchase

43. You can often negotiate a lower sale price by employing a buyer broker who works for you, not the seller. If the buyer broker or the broker’s firm also lists properties, there may be a conflict of interest, so ask them to tell you if they are showing you a property that they have listed.

44. Do not purchase any house until it has been examined by a home inspector that you selected.

Renting a Place to Live

45. Do not limit your rental housing search to classified ads or referrals from friends and acquaintances. Select buildings where you would like to live and contact their building manager or owner to see if anything is available.

46. Remember that signing a lease probably obligates you to make all monthly payments for the term of the agreement.

Home Improvement

47. Home repairs often cost thousands of dollars and are the subject of frequent complaints. Select from among several well established, licensed contractors who have submitted written, fixed-price bids for the work.

48. Do not sign any contract that requires full payment before satisfactory completion of the work.

Major Appliances

49. Consult Consumer Reports, available in most public libraries, for information about specific appliance brands and models and how to evaluate them, including energy use. There are often great price and quality differences. Look for the yellow Energy Guide label on products, and especially for products that have earned the government’s ENERGY STAR, which can save up to 50% in energy use.

50. Once you’ve selected a specific brand and model, check the Internet or yellow pages to learn what stores carry the brand. Call at least four of these stores to compare prices and ask if that’s the lowest price they can offer you. This comparison shopping can save you as much as $100 or more.

Heating and Cooling

51. A home energy audit can identify ways to save up to hundreds of dollars a year on home heating (and air conditioning). Ask your electric or gas utility if they audit homes for free or for a reasonable charge. If they do not, ask them to refer you to a qualified professional.

52. Enrolling in load management programs and off-hour rate programs offered by your electric utility may save you up to $100 a year in electricity costs. Call your electric utility for information about these cost-saving programs.

Telephone Service

53. Once a year, review your phone bills for the previous three months to see what local, local toll, long distance, and international calls you normally make. Call several phone companies which provide service in your area (including wireless and cable), to find the cheapest calling plan that meets your needs. Consider a bundled package that offers local, local toll and long distance, and possibly other services, if you heavily use all the services in the bundle.

54. Check your phone bill to see if you have optional calling features or additional services, such as inside wire maintenance, that you don’t need. Each option you drop could save you $40 or more each year.

55. If you make very few toll or long distance calls, avoid calling plans with monthly fees or minimums. Or consider disconnecting the service altogether and use dial around services such as 10-10 numbers or prepaid phone cards for your calls. When shopping for dial around service, look for fees, call minimum, and per minute rates. Treat prepaid cards as cash and find out if there is an expiration date.

56. If you use a cell phone, make sure your calling plan matches the pattern of calls you typically make. Understand peak calling periods, area coverage, roaming, and termination charges. Contracts offered by most carriers will provide you with a trial period of 14 days or more. Use that time to make sure the service provides coverage in all the places you will be using the phone (home, work etc.). Prepaid wireless plans tend to have higher per minute rates and fees but may be a better option if you use the phone only occasionally.

57. Before making calls when away from home, compare per minute rates and surcharges for cell phones, prepaid phone cards, and calling card plans to find how to save the most money.

58. Dial your long distance calls directly. Using an operator to place the call can cost you up to $10 extra. To save money on information calls, look the number up on the Internet, or in the directory.

Food Purchased at Markets

59. You can save hundreds of dollars a year by shopping at lower-priced food stores. Convenience stores often charge the highest price.

60. You will spend less on food if you shop with a list, take advantage of sales, and purchase basic ingredients, rather than pre-packaged components or ready-made items.

61. You can save hundreds of dollars a year by comparing price-per-ounce or other unit prices on shelf labels. Stock up on those items with low per-unit costs.

Prescription Drugs

62. Since brand name drugs are usually much more expensive than their generic equivalents, ask your physician and pharmacist if a less expensive generic or an over the counter alternative is available.

63. Since pharmacies may charge widely different prices for the same medicine, call several. When taking a drug for a long time, also consider calling mail-order pharmacies, which often charge lower prices.

Funeral Arrangements

64. Plan ahead, making your wishes known about your funeral, memorial, or burial arrangements in writing to save your family or estate unnecessary expense.

65. For information about the least costly options, which may save you several thousand dollars, contact a local Funeral Consumer Alliance or memorial society, which are usually listed in the Yellow Pages under funeral services.

66. Before selecting a funeral home, call several and ask for prices of specific goods and services, or visit them to obtain an itemized price list. You are entitled to this information by law.

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Year after year, the IRS sees Americans committing the same mistakes on their returns. Many of these errors are easy to avoid; some are more complicated. Nevertheless, whenever in doubt, seek the advice of a professional tax consultant.

Claiming the Wrong Filing Status

Claiming the wrong status could ruin your eligibility for the child tax credit, the earned-income credit and exemptions for dependents. Check out Form 1040 for information to help you select your correct filing status.

Omitting or Using Incorrect Social Security Numbers

The Social Security Numbers you list for your dependents, the earned-income credit and the child tax credit must match your dependents’ Social Security cards. Otherwise, the IRS will reject your credits and deductions. If you’re still doing your return by hand, make sure your handwriting is legible.

Failing To Use Correct Forms and Schedules

Think of the IRS as a vast bureaucracy that responds to the directives of an outdated computer system for audit direction. So, be nice to the computer. Correctly file all of the appropriate forms.

Failing To Sign and Date the Return

Technically, if you don’t sign the return, you haven’t filed. And, if you haven’t filed, you’re going to be subject to all kinds of penalties, not to mention interest on any amounts not paid in full. Don’t forget, both spouses MUST sign a joint return.

Claiming Ineligible Dependents

When the IRS started requiring Social Security numbers for claimed dependents, millions of dependents disappeared. In any case, the qualification criteria to claim a dependent are very specific. Follow the instructions on Form 1040.

Not Using the Earned-Income Credit

It’s a provision to help the poorest in our nation. Unfortunately, because it is one of the most convoluted provisions in our tax code, the IRS reports failure to claim the earned-income credit as its No. 6 top taxpayer mistake!

Failing To Report All Income

Not all income is reported on a W-2 form or a 1099. The fact that there’s no reporting to the IRS doesn’t prevent the agency from auditing your receipts and reconciling your bank deposits with your reported income. Unreported income can lead to civil and criminal sanctions.

Failing To Check For the Alternative Minimum Tax

The AMT, or “awfully mean tax,” was created to catch high-income taxpayers who used allowable deductions and credits to greatly reduce their tax liability. Unfortunately, because it hasn’t been updated to reflect inflation since the original bill was passed, the AMT was projected to hit about 19 million families in 2007. The IRS has an AMT estimation calculator on its Web site, but, to be sure, run through Form 6251.

DMB Financial LLC is not giving tax advice and recommends that you consult your tax attorney or accountant with any tax-related questions.

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A poet once wrote that April is the cruelest month, and who knows? He might have been motivated to write that line as he filed his income tax return for the previous year.

It’s nobody’s favorite activity – but before you know it, that familiar 1040 time will be here again. Right now is the time to begin lining up those legitimate deductions that will reduce the amount you’ll owe Uncle Sam. In fact, now is also the time to look ahead and begin planning for 2009. In the meantime, don’t forget to consider write-offs that can easily be overlooked, such as these:

Charity begins with a tax deduction. Did you donate clothes, furniture, or other items to a charity such as Goodwill during the previous year? If so, the value of those items is deductible. Just be sure you have a written receipt as proof should you happen to get audited. You’re also entitled to a deduction if you dumped old (but serviceable) clothes into a Salvation Army box; unfortunately, that kind of charitable contribution doesn’t come with a receipt. In the immortal words of Clint Eastwood’s Dirty Harry, “Do you feel lucky?”

Put a premium on health insurance deductions. Your health insurance premiums, as well as certain long-term care premiums, might be deductible. Remember, though, that your total medical expenses must exceed 7.5% of your adjusted gross income (AGI). If, however, you’re self-employed and not covered by another employer’s plan, you can deduct 100% of your health insurance expenses because they’re included in your AGI – meaning that they don’t have to exceed that 7.5% figure. In fact, they don’t have to be itemized at all.

Remember tax planning and investment expenses. It’s easy to forget those expenses because they fall into the category of miscellaneous itemized expenses. Some to keep in mind are employee business expenses, tax preparation fees, and any portion of your legal or accounting fees having to do with tax planning. As for investment expenses, don’t overlook the annual fee paid your broker or any IRA fees. Also, while you’re compiling your long-distance phone calls to your broker and investment adviser, don’t forget that the mileage to visit them is also deductible.

Take retirement into account. Contributions into your retirement account aren’t taxed until you begin withdrawals. In the meantime, those contributions are a deduction from your taxable income. What’s more, you’re entitled to a credit of up to 50% of the first $2,000 you invest – a reduction of as much as $1,000 off your tax bill.

These are only a few of the more common items you’ll want to take into consideration when preparing your return. There are plenty of others, so be sure to thoroughly discuss all potential deductions with your tax advisor. The whole idea is to make your April a kinder, gentler month.

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1. 7 Little Known Tax Write Offs
2. Why Tax Preparers Find Extra Deductions on Your Return
3. Turn Your Donations Into Tax Deductions

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