Beef up savings
You have until the April 15 tax deadline to contribute to an IRA for 2012. The maximum contribution is $5,000, or $6,000 for those age 50 and up.
Contributions to a traditional IRA are fully tax-deductible if you don't have a retirement plan at work. If you do, you can deduct all or some of your contributions if your adjusted gross income for 2012 is under $68,000 for singles and $112,000 for married joint filers.
There's no tax deduction for contributing to a Roth IRA, but withdrawals are tax-free in retirement. Full or partial contributions can be made to a Roth for 2012 if income is under $125,000 for singles or $183,000 for joint filers.
Families within certain income limits also have until the tax deadline to make a 2012 contribution of up to $2,000 to a Coverdell Education Savings Account for a child. There's no tax deduction, but withdrawals from this investment account can be tax free if used for education expenses from kindergarten to college.
A credit for adoption expenses has been made less generous for 2012, thanks to abuse of the tax break, said Thomson Reuters' Pretsfelder. Parents, depending on their income, can claim a credit of up to $12,650 per child in 2012, or $710 less than the year before. And the credit is no longer refundable.
A credit reduces your tax liability dollar for dollar. But a refundable credit means that you can get the credit as a refund if you don't owe any taxes.
Ar one time if you were on business, you couldn't deduct expenses paid for lodging near where you live, Thomson Reuters Jeff Pretsfelder said. Starting in 2012, local lodging is deductible for business travelers — provided it's not extravagant. That includes cases in which workers on the job couldn't get home because of a snowstorm, he said.
Don't reduce your tax withholdings from your paycheck to make up for the loss this year of the 2 percent payroll tax holiday, said Jackie Perlman, principal researcher for the H&R Block Tax Institute. You might owe taxes next year if withholdings fall short, she said.
But married couples might want to adjust withholding to have more money taken out of their paycheck for an entirely different reason, she said. The health care law imposes a 0.9 percent levy on wages above $200,000 for singles and $250,000 for joint filers starting this year.
Employers will start withholding that tax as soon as workers' income reaches $200,000, she said. But a two-income couple making, say, $150,000 each won't have the tax withheld, and could end up with a big tax bill next year for this lack of withholding. Having more taken out of paychecks this year will prevent that, she said.
Increasingly, identity thieves file fake tax returns using pilfered Social Security numbers. They inflate deductions to generate big refunds that are then directly deposited in their bank accounts. When legitimate taxpayers file, their returns are rejected and they must undergo a lengthy process to prove their identity to get their refund.
One way to protect yourself is file before a thief can.
Eileen Ambrose, the Baltimore Sun