Last-Minute Tips to Lower Your 2011 Income Tax Bill (Part 2 of 2)

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CHICAGO — The filing deadline for 2011 federal income taxes is not far off, but you still have time to make sure you’ve done everything you can to keep Uncle Sam’s paws off as much of your money as possible. Here are some last-minute ways to do that by reducing your 2011 income tax bill:

Often-Overlooked Deductions

Many easily overlooked miscellaneous expenses are deductible as long as they add up to at least 2% of your adjusted gross income. Grouping them can help you meet the threshold. Here are some miscellaneous items you may have overlooked:

• Tax Preparation Costs — You may claim the cost of personal income tax preparation software or books as a miscellaneous deduction. If you hire a professional tax preparer to do your taxes, you may also be able to deduct the fee.
• Interest from Home Refinancing — If you refinanced a mortgage and still have unamortized points left to deduct from an earlier refinancing, you can claim all the unamortized points from the earlier refinancing as deductible interest.
• Purchases Financed By Loans or Credit Cards — If you made large purchases on your credit card or with a loan, don’t forget to deduct any interest costs involved.

Use caution when taking advantage of miscellaneous deductions; document everything. If the IRS decides to question any of your deductions, it will want to see pertinent receipts and statements.

The IRS toll-free help line—800-829-1040—is available from 7 a.m. to 10 p.m. weekdays. Its website has interactive tax aids, forms, and publications for downloading.

If you’re unable to complete your return on time, you may request an automatic extension to Aug. 15; Form 4868 has details. There is also a special toll-free number—888-796-1074—for requesting an extension by phone; call before the regular filing deadline.

An extension gives extra time for filing only, not for paying any balance due. Interest will apply to any tax not paid by the April deadline, plus a late payment penalty if you pay less than 90% of the total tax on time.

Keeping your personal income tax to the legal minimum requires a little planning and effort on your part, but the time you spend chipping away at your taxes may be among the most profitable investments you’ll make this year.

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult an accountant or tax adviser for advice regarding your particular situation.

Click here for Part 1.