Decide whether to pay Roth conversion taxesIndividuals now can convert traditional IRA savings into Roth IRAs regardless of their income. For conversions completed in 2010, account holders also get the option to postpone paying any taxes on such retirement account changeovers.
The default filing position is that you'll count half of any income produced by the IRA conversion in the 2011 tax year and the other half in 2012, and then pay taxes on the amounts with those respective tax filings.
Most individuals likely will opt to do just that, says Luscombe, since the tax law enacted at the end of 2010 keeps income tax brackets at their current rates for the next two years.
However, if you find it works better for you to pay all of the taxes associated with a Roth on your 2010 return, let the IRS know by filing Form 8606.
You also have a similar two-year deferred tax payment option, says Luscombe, if your employer offers a Roth 401(k) account and last year you rolled your traditional 401(k) savings into a Roth workplace plan.
Add up your adoption creditThe health care reform law offers an expanded tax break to families who adopted children last year. The maximum adoption credit for 2010 was increased to $13,170. The increased credit applies to the adoption of any child, not just special needs children, and the credit is refundable.
Max out your itemized deductionsHigher-income earners get to keep all their itemized deductions and personal exemptions claimed on 2010 tax returns. In prior years, once your adjusted gross income exceeded a certain amount, you had to reduce these tax break amounts. The exemption and deduction phaseouts, however, have themselves been phased out.
Take your timeFinally, for all you procrastinators (that's why this tip is last!), the best news about your 2010 taxes is that you have until April 18 to file your return. As with the filing delays mentioned earlier, this technically isn't a new law, but rather a convergence of a Washington, D.C., holiday and the 2011 calendar. The bottom line, though, is that everyone across the country gets three extra days to submit their 2010 tax returns.
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