13 smart year-end tax moves
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If you don't have enough taxes taken out of your paycheck, you could end up owing the IRS at tax-filing time. Worse, you could face penalties and interest if the shortfall is more than $1,000.

Going too far the other way with your withholding is not a good idea, either. Sure, overwithholding means you'll get a refund check when you do file. But that also means that the federal government, instead of you, has had access to your cash all these months. If you had been collecting the cash, you could have stashed it in a savings account or CD (Bankrate can help you find the highest rates), where it would have earned a little bit of interest and provided you with some extra money to spend on holiday gifts.

Making adjustments to your withholding is easy. If you find that too much tax is being taken out, put cash back in your pocket by increasing allowances on your W-4 to reduce withholding. If you're not having enough withheld, you can prevent a huge tax bill by reducing allowances or even telling your boss a specific extra dollar amount you want withheld.

Your payroll manager office should have a new W-4 you can fill out, or you can download one from the IRS site. The key is to get the changes made before your last paycheck of the year is issued.

But even if you're too late to do anything about 2006 withholding, it's still a good time to look at what adjustments you should make for the coming year. This is especially important if circumstances in your life have changed -- you got married, had a child or bought a house. All of these affect your taxes and can be accounted for through payroll withholding.

And when the changes show up on your paycheck, you've got a head start on making sure that 2007 is a better tax year.

13. Expired tax breaks extended
Finally, in the closing hours of this congressional session, lawmakers revived three popular tax credits that had expired on Dec. 31, 2005.

Now on your 2006 returns you can claim the itemized deduction for state sales taxes paid, as well as the deductions directly on your Form 1040 for classroom supplies that teachers paid for themselves, and college tuition and fees expenses. Any of these costs that you incurred throughout all of 2006 count, as well as what you pay in these last few days of the year.

Pay particular attention to the sales tax option. The IRS provides tables that taxpayers can use to claim the average amount of sales taxes paid in their states. But if you buy a vehicle, hybrid or otherwise, by Dec. 31, now that the sales tax write-off is back on the tax books, you can count any sales tax you pay on your new car on top of the table amount.

Freelance writer Kay Bell writes Bankrate's tax stories from her home in Austin, Texas, and blogs each day on tax topics at Don't Mess with Taxes.