If you don’t have an IRA (individual retirement account) and you qualify for a deductible one, setting one up and making a contribution before the April 15 deadline can cut your 2012 taxes. Be sure to make clear to your bank or broker that the contribution is for 2012 even though you’re making it in 2013.

Review your children’s tax filing requirements. If your child had wage income only during 2012, a tax return is required if wages exceeded $5,950. If the child earned less than $5,950 but employers withheld taxes, a tax return must be filed if you want a refund.

• If your child had net self-employment earnings of $400 or more in 2012, a return is required and a self-employment tax is due. Income tax could be due if earnings exceeded $5,950.
• If your child had investment income only during 2012 (such as dividends and interest), filing is required if the total exceeded $950.
• If your child had both earned and investment income , a return is required if the total was more than the larger of (a) $950 or (b) earned income plus $300 (up to $5,950).

Don’t let any tax credits slip through the cracks. A tax credit is a dollar-for-dollar reduction in your tax bill. The benefit that you derive from a tax deduction depends on your bracket. Therefore, a credit is always more valuable than a deduction. If you incur any expenses for education or child care, it can be especially important to plan for potential credits.

If you can’t file your tax return by the April 15 deadline, use Form 4868 to give you up to six additional months to complete your return. Even if you have no problem filing by April 15, getting an extension might be a good idea in certain situations. It extends the time for some pension contributions, for example. Be aware, however, that Form 4868 extends only your filing deadline; it does not give you more time to pay taxes due.

Lisa Osborne
Office Administration
lisaosborne@mo-cpa.com