It's tax season again, and savvy taxpayers search for ways to save not only when they file their 2001 returns, but also by planning for savings on their 2002 return. Here are some high points to stimulate your appetite for more Foolish tax information throughout Fool.com.
Don't hold up your refund
The tax doctor says, "First, do no harm." You can hold up your refund at least two ways this year. The first is a pest entitled "rate reduction credit," that appears at line 47 of your Form 1040 or line 30 of your Form 1040A. The credit is a not a chance for you to double the $300 (single), $500 (head of household), or $600 (married couples) check you received last summer, but instead for people who didn't get one to perform some calculations to see if they are entitled to it now. Over a million taxpayers have claimed this credit incorrectly, slowing down their refund.
The second hold up is the answer to Romeo's complaint, "What's in a name?" A lot, whether it's Capulet, Montague, or Scrimshaw. The name on your tax return must exactly match the name on your social security card. If you are newly wed or newly divorced and changed your name, or just thought "Tom Cruise" sounded better, you need to download the form from www.ssa.gov and prove you are who you are at your local Social Security Administration office.
Parents will find that their child tax credit increased $100 to $600 in 2001. It won't go up again until 2005 ($700), 2009 ($800), and 2010 ($1000), so hold off on the kids until then. Kidding! If you adopted in 2001 or are planning to, remember that you can claim a credit up to $5000 in adoption expenses for 2001, and that doubles to $10,000 in 2002. You will need to check out the instructions for what expenses qualify and what paperwork you will need as support.
IRAs and 401(k)s
If you haven't made your IRA contribution for 2001, you can do it until April 15th. Your $2000 contribution limit for a Roth or traditional IRA increases to $3000 for 2002. Those people who fund their contribution monthly may want to bump up the amount so they will hit $3000. Your 401(k) or 403(b) plan contribution limit increases from $10,500 in 2001 to $11,000 this year, so check your payroll deduction to make sure you don't miss the extra $500. And if you are 50 or older, you get at least one bonus for maturity. You can contribute an extra $500 a year ($3500 for 2002) to your IRA through 2005, and another $1000 to your 401(k) or 403(b) plan.
More Help From the Fool
There's much more, of course, and we've got you covered. Take our Crash Course, "Make the Tax Cut Work for You." Have tax questions you'd like to ask a financial planner? Our TMF Money Advisor service could be just the ticket you need. And, of course, there's always our fun and Foolish tax opus: The Motley Fool Tax Guide 2002.
Tom "Whaddya mean, 'no refund'?" Jacobs is too honest and too scared to cheat the government. Be like him. The Motley Fool has a full disclosure policy.