Last Minute Tax Tips: Filing Extensions Tax Credits for Students, IRA Deductions and More

One of the first tips heard during tax season is to avoid waiting until the last minute. With the just a week until the filing deadline, you may find yourself in that very predicament.

Thankfully, we have three extra days to file our tax returns – the deadline has been extended to April 18. With the help of a local tax preparer, we have compiled five helpful tips and important tax breaks to remember when you file your last-minute taxes.

1) Students, Take Advantage of Your Tax Credits

A poor economy has driven up college enrollment by 15 percent. Luckily for students, there are several credits, including a Lifetime Learning Credit of up to $2,000 for coursework to improve job skills. Joint filers can’t claim the credit if their income exceeds $120,000. The American Opportunity Credit allows for tuition and books this year. 

“Also, don’t forget that parking permits are also deductible,” said Nicholas J. Batch, C.P.A. for Liberty Tax in Glendora. “If you have already filed, review your return to ensure you captured all possible credits. “

2) Last Call Credit For Private and High School Tuition

This is your last chance to use funds in a Coverdell Education Savings account to pay for private elementary and high school tuition. Starting next year, only college-related costs will qualify for tax-free distributions. This is also the final year you can use funds from a 529 college-savings account tax-free to purchase a computer, software or Internet service for your student.

“It's not often you get to play Santa with tax-free money,” said Batch.

3) Fully Fund Your IRA   

One way you can lower your tax bill is to fully fund your individual retirement account. IRA deductions are available until April 18, however, filers covered by their employer’s 401(k) can’t claim an IRA deduction if their taxable income exceeds certain thresholds, says Batch.

The maximum annual contribution is $5,000, or $6,000 for those 50 and older.

4) The Self-Employed Can Score Big in Tax Breaks

The self-employed can enjoy more lucrative tax breaks, so they should look over their options very well to take advantage of the savings.

Beware: 2010 contributions to a ROTH IRA will affect your ability to contribute to a tradition IRA for 2010, says Batch.

5)  A Filing Extension Does Not Mean a Payment Extension

The extended deadline eliminates a late filing penalty however you will still need to pay any amounts due before the deadline of April 18. 

“A common misconception is that an extension is an extension to pay--not the case,” said Batch.

Fortunately, there are installment agreement plans to help you pay off any amounts due.

“However, communication with the IRS is vital and the key to preventing any drastic measure on the IRS side,” said Batch.

More On Taxes: