(ThyBlackMan.com) Take Heart, Laggards, There Is Still Time to Cut Your Bill or Boost Your Refund…
The government has given its citizens several new tax breaks this year, and has made it easier than ever for them to file their returns. The days of battling lines at the post office are over (mostly); now a return can be transmitted with little more than a mouse click.
So why aren’t people filing earlier?
For years now, the pattern has been fairly predictable, with 40% of 1040s arriving at the IRS after April 1. This year the pace for all returns has been trailing last year’s by more than 2%.
This year many brokers, including Fidelity Investments, Charles Schwab, and Bank of America’s Merrill Lynch, mailed some correct 1099 reports weeks after the Feb. 15 deadline, continuing a trend that began a few years 
ago. (Brokerages often say they have to rely on outside providers such as mutual funds that drag their feet.) K-1 partnership forms thick as phone books often don’t reach investors until September, forcing many to file for a six-month extension. And the ease of electronic filing may be fueling procrastination more than curing it.
But those hurdles only magnify a basic underlying truth: preparing a tax return is, and will probably always be, a miserable process. Even for experts. “Look at me,” says Christopher Bergin, the president of Tax Analysts, a leading tax publisher. “I have loved taxes ever since my first day of law school. I even love paying them. But I dread—really dread—the process.” He calls it “stupid and complicated—figuring out if deductions are limited, then exemptions. By the time I hit the Alternate Minimum Tax, I’m yelling, ‘This isn’t taxation, this is robbery!'” This year Mr. Bergin gave up his do-it-yourself dreams and hired a preparer—but didn’t get his records in until March 24.
Plenty of people are so put off that they never file at all. Tax rules prohibit claiming most refunds more than three years after a return should have been filed. Recently the IRS estimated that it is sitting on more than $1.3 billion in unclaimed refunds that should have gone to 1.4 million people who didn’t file in 2006 and whose right to that money will soon expire.
That sort of behavior is extreme, of course. When you finally summon the courage to tackle your 2009 return, you will find that a number of changes made to the tax code in the name of economic stimulus could fatten your refund. Here is what to look for:
On the Home Front
Home buyers got the biggest pop last year. Lawmakers extended the first-time home-buyer tax credit of $8,000 and, for purchases after Nov. 6, added a repeat home-buyer credit of $6,500. Qualified buyers who complete deals before July 1 of this year can claim these credits on either 2009 or 2010 returns. Decide carefully. “Because of income restrictions, sometimes a couple qualifies in one year but not the other,” notes IRS spokesman Eric Smith. The same form applies to either credit.
Home-fixers got a boost, too. For both 2009 and 2010, taxpayers can receive a tax credit of up to $1,500 for 30% of the cost of energy-efficient home improvements such as windows and heating or air conditioning units. A different credit allows 30% of the full cost of solar water heaters and wind turbines, among other items, and there are no income limits on either benefit.
One more, for nonitemizers: They are allowed to deduct an extra $1,000 of property taxes on 2009 returns.
The Workplace
Business owners also benefited last year. In November lawmakers allowed many large and small businesses to carry losses back up to five years and receive tax refunds.”This has been a real lifesaver,” says accountant Danny Snow of Thompson Dunavant in Memphis.
Small business owners also can accelerate some other deductions, including as much as 50% of the cost of a company car, but these write-offs can’t be used to create or increase a loss.
For current and former employees, two changes stand out. The Making Work Pay tax credit can save up to $800 for a couple earning less than $190,000 ($95,000 for single filers). Many workers had their withholding adjusted last year to reflect this change, but it still must be claimed on the 2009 return, and it is easy to overlook.
For those receiving unemployment benefits, lawmakers exempted the first $2,400 from tax. The rest, alas, is taxable.
Other Changes
Students and their parents received an education benefit for 2009 that outshines many others. The $2,500 American Opportunity Credit is a tax credit available to married couples with AGI less than $180,000 ($90,000 single).
For parents with incomes above the limit, it sometimes makes sense to forgo claiming the child as a dependent and let him or her take the tax credit instead.
Here is why: The dependent exemption is a deduction of $3,650 for 2009, but those subject to the alternative minimum tax can’t take it at all and it is limited for those with AGI of more than $250,000. If qualified educational expenses—tuition, books, a computer—have been paid for the child and he or she has any unearned income or has earned more than the standard deduction, this strategy could be more valuable than claiming the exemption would be to the parents. Amounts that were paid last year for Spring 2010 are deductible on the 2009 return.
Taxpayers who bought new (not used) cars after Feb. 16 and before the end of last year may deduct sales taxes on the purchase. Income limits are generous: up to $260,000 for couples ($135,000, single).
The rules on medical expenses didn’t change last year, but the convulsions in the economy made them newly relevant for many taxpayers. Only the amount above 7.5% of adjusted gross income may be deducted, but once that threshold is crossed a wide variety of expenses qualifies, from out-of-pocket amounts for insurance premiums to contact lens solution. See IRS Publication 502 for a run-down.
Last-Minute Moves
There are still steps you can take to cut 2009’s tax bill. The best benefit may be the home-buyer tax credit, but there are others. Contributions to Haiti relief made before March 1, 2010 are deductible on 2009 returns. Lawmakers didn’t extended this privilege to Chile relief contributions or those to Haiti made after March 1, so they are deductible on 2010 returns.
You also can deduct contributions to a regular IRA (through April 15) or a SEP IRA (through Oct. 15 with an extension). And you can take a 2009 deduction of up $5,950 per family ($3,000 single) to establish or contribute to a Health Savings Account if you have a qualified high-deductible health plan, if the contribution is made by April 15.
For E-filers
Last year two-thirds of returns were e-filed, and the percentage is up this year, as more taxpayers get comfortable with the proceses.
The good news: No big computer glitches have occurred. Officials have worked to multiply the e-filing channels: In addition to going through an individual tax preparer or using resources like TurboTax or H&R Block, taxpayers also can make use of free e-filing options on the IRS Web site.
Some are suited to taxpayers making up to $57,000, but for the more sophisticated there are free interactive forms. Several dozen are available, and they include a calculator that checks for math errors. This is a good option for the few who still do taxes by hand.
This year nearly all taxpayers will receive an email confirmation from the IRS within 48 hours of filing. A return may be rejected if there is a Social Security glitch or a dependent is claimed on more than one return. E-filers who have a balance due may have the money withdrawn from a bank account at once or on any specified day through April 15. It also is possible to e-file and mail in a paper check by April 15th.
And, yes, you can e-file Form 4868, requesting the automatic six-month extension. Just remember you have to pay what you owe by April 15 or you will owe interest and perhaps penalties.
Armed with this knowledge, it is high time you don the green visor, pour some coffee and let the filing begin.
Written By Laura Saunders
