2011 is almost over and that means tax time is fast approaching. If you're like most, you probably said that you would do a better job at keeping track of receipts and making financial decisions with your tax liability in mind. If you once again fell short of that goal in 2011, don't worry. The year isn't over yet and you have plenty of time to make some tax-smart decisions before ringing in 2012. (For related reading, see 10 Steps To Tax Preparation.)

TUTORIAL: Personal Income Tax Guide

Give to Charity
Giving to charity allows you to deduct some or all of your donation equal to your tax rate. If your tax rate is 28%, 28 cents of every dollar you donate will be counted towards your total deduction.

If you have stock that you have owned for more than one year, donating a portion of that allows for an additional tax advantage. If you purchased $2,000 worth of stock that is now worth $4,000, you can donate your original investment and not only receive a tax deduction of $2,000 but you also don't have to pay capital gains taxes on the money you made. This is a common way that higher net worth individuals make donations without paying any more out of pocket.

The IRS rules regarding charitable contributions are complicated. Make sure you're donating to approved charities and that you're not going over the maximum amount allowed. (To learn more, read Cut Your Tax Bill With Donor-Advised Funds.)

Examine Your Records
The ball will drop on December 31 and it will be out with 2011 and in with 2012. It will also mean the end of your holiday season vacation and a return to the daily rituals that include long days at work and family responsibilities.

Don't procrastinate this year. While you have a day or two off from work, go through all of your bank and credit card statements as well as the receipts you actually did save and make a list of deductions you will itemize when you complete your 2011 taxes. Keep that list with you and add prior to completing your tax return.

If you're like most, you haven't done as good of a job as you would have liked keeping a running list of deductions. Don't cheat yourself out of deductions that you deserve because you didn't prepare for the tax season. (For more information, read Tax Deductions You May Be Missing.)

Fund Your Retirement
Although you can make contributions to your IRA through Apr. 16, 2012, the sooner you fund your IRA, the sooner your contribution can start working for you. In 2011, you can contribute up to $5,000, or $6000 if you are 50 years of age or older by the end of 2011, to your IRA without penalty and because the gains appreciate tax free, aim for the maximum each year.

Add up Your Miles
In the past, how often have you lost out on valuable mileage deductions because you didn't keep accurate records? You can deduct un-reimbursed miles that you drive for work, mileage for work that you do for a qualified charity, mileage associated with a long distance move and mileage for your business. Not all miles are deducted at the same rate, so check the IRS publication for the correct rates for each type of mileage deduction.

The Bottom Line
You certainly wouldn't be one of those people who over exaggerates his or her deductions, but some people do and the IRS is aware of that. The IRS publishes the average deductions claimed by American households. If you claim deductions more than approximately 20% higher than the average of households in your income bracket, make sure you have proper documentation in case of an IRS audit. (For related reading, see Surviving The IRS Audit.)

Related Articles
  1. Saving and Spending

    What Baby Boomers Need to Know About IRA RMDs

    Mandatory minimum distributions from traditional IRAs and qualified plans cannot be avoided. But there are several ways to minimize their impact.
  2. Your Clients

    How to Construct an Annual Review for Clients

    One of the best things that advisors can provide to clients is an annual review of their financial situation. Here are some guidelines.
  3. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  4. Taxes

    Free 2016 Tax Preparation! Top Online Services

    A place that fills out and files your taxes free of charge? It's no myth, as long as you have a simple return. Read on to find the top preparers.
  5. Term

    How Traditional IRAs Work

    A traditional IRA is a tax-advantaged retirement account that includes stocks, bonds, mutual funds and other investments.
  6. Taxes

    Why People Renounce Their U.S Citizenship

    This year, the highest number of Americans ever took the irrevocable step of giving up their citizenship. Here's why.
  7. Retirement

    5 Reasons Millennials Lead in Saving for Retirement

    Say what you want to about millennials but the one thing they are doing better than any other generation is saving for retirement. Here's why.
  8. Retirement

    How Much Should You Have In Your 401(k) To Retire?

    Determining how much money should be in your 401(k) when you retire depends on several variables, many of which are uncertain.
  9. Investing

    How To Make Sure Your Healthcare Costs Do Not Ruin Your Retirement

    The best proactive plan of action for a stable retirement is to understand medical costs, plan ahead, invest properly, and consider supplemental insurance.
  10. Investing

    3 Small Steps to Maximize Your Investing Goals

    Instead of starting the New Year with ambitious resolutions, why not taking smaller manageable steps that can have a real impact.
RELATED FAQS
  1. Am I losing the right to collect spousal Social Security benefits before I collect ...

    The short answer is yes, if you haven't reached age 62 by December 31, 2015. The Bipartisan Budget Act of 2015 disrupted ... Read Full Answer >>
  2. When should my tax refund arrive?

    More than 90% of income-tax refunds arrive in less than three weeks, according to the Internal Revenue Service (IRS). However, ... Read Full Answer >>
  3. How do I file taxes for income from foreign sources?

    If you are a U.S. citizen or resident alien, your income (except for amounts exempt under federal law), including that which ... Read Full Answer >>
  4. Are Flexible Spending Account (FSA) items tax deductible?

    Flexible Spending Accounts (FSAs) are employer-sponsored, tax-favored savings plans expressly for the future reimbursement ... Read Full Answer >>
  5. How Long Should I Keep My Tax Records?

    The Internal Revenue Service (IRS) has some hard and fast rules regarding how long taxpayers should keep their tax records. As ... Read Full Answer >>
  6. Where else can I save for retirement after I max out my Roth IRA?

    With uncertainty about the sustainability of Social Security benefits for future retirees, a lot of responsibility for saving ... Read Full Answer >>
Trading Center