Question

Most tax planning suggests are given during a preparation of a prior year return. The suggestion enables taxpayers to plan for the future but do not affect the outcome of the return currently being filed. Which process can reduce tax liability on the prior year return that is being prepared as the advice is given

Answer 1

1. Contribute to retirement accounts

Making a deductible contribution will help you lower your tax bill this year. Plus, your contributions will compound tax-deferred.

choosing to contribute to a Roth IRA instead of a traditional IRA will not cut your 2019 tax bill-Roth contributions are not deductible-it could be the better choice because all withdrawals from a Roth can be tax-free in retirement.

The amount you save for making a contribution will vary. If you are in the 25% tax bracket and make a deductible IRA contribution of $6,000, you will save $1,500 in taxes the first year. Over time, future contributions will save you thousands, depending on your contribution, income tax bracket, and the number of years you keep the money invested.

2. Make a last-minute estimated tax payment

If you didn’t pay enough to the IRS during the year, you may have a big tax bill staring you in the face. Plus, you might owe significant interest and penalties, too.

According to IRS rules, you must pay 100% of last year’s tax liability or 90% of this year’s tax or you will owe an underpayment penalty.

3. Organize your records for tax time
Good organization may not cut your taxes. But there are other rewards, and some of them are financial. For many, the biggest hassle at tax time is getting all of the documentation together. This includes last year’s tax return, this year’s W-2s and 1099s, receipts and so on.

4. Itemize your tax deductions
It’s easier to take the standard deduction, but you may save a bundle if you itemize, especially if you are self-employed, own a home or live in a high-tax area.

5. Don't shy away from a home office tax deduction
The eligibility rules for claiming a home office deduction have been loosened to allow more self-employed filers to claim this break. People who have no fixed location for their businesses can claim a home office deduction if they use the space for administrative or management activities, even if they don’t meet clients there.

6.

Provide dependent taxpayer IDs on your tax return
Be sure to plug in Taxpayer Identification Numbers (usually Social Security Numbers) for your children and other dependents on your return. Otherwise, the IRS will deny any dependent credits that you might be due, such as the Child Tax Credit.

Be especially careful if you are divorced. Only one of you can claim your children as dependents, and the IRS has been checking closely lately to make sure spouses aren’t both using their children as a deduction. If you forget to include a Social Security number for a child, or if you and your ex-spouse both claim the same child, it’s highly likely that the processing of your return (and any refund you’re expecting) will come to a screeching halt while the IRS contacts you to straighten things out.
After you have a baby, be sure to file for your child's Social Security card right away so you have the number ready at tax time. Many hospitals will do this automatically for you.
If you don’t have the number you need by the tax filing deadline, the IRS says you should file for an extension rather than sending in a return without a required Social Security number.

7. File and pay on time

If you file and pay late, the IRS can slap you with a late-filing penalty of 4.5% per month of the tax owed and a late-payment penalty of 0.5% a month of the tax due.
The maximum late filing penalty is 22.5% and the late-payment penalty tops out at 25%.
By filing Form 4868, you stop the clock running on the costly late-filing penalty.