But this year, many of us will have to wait until at least mid-February to file our returns.

Lawmakers waited until last month to make last-minute tax-law changes. The Internal Revenue Service said recently those changes will require the agency to “reprogram its processing systems” for a few provisions that were extended in the law enacted in mid-December.

Who will be affected?

First, the IRS said the delays will affect those who “itemize” their deductions on Schedule A. Itemized deductions include such things as charitable donations, mortgage interest, medical expenses and state and local taxes.

About one-third of all taxpayers typically itemize their deductions each year. Nearly two-thirds take the “standard” deduction.

The delay also will hit taxpayers affected by some recently reinstated deductions. “People claiming any of these three items — involving the state and local sales tax deduction, higher-education tuition and fees deduction and educator-expenses deduction — as well as those taxpayers who itemize deductions on Form 1040 Schedule A will need to wait to file their tax returns until tax processing systems are ready, which the IRS estimates will be in mid to late February,” the IRS said in its recent statement.

The delay affects both taxpayers who file the old-fashioned paper way as well as those who file electronically.

Don’t be a procrastinator!

Don’t be like the guys in DC and procrastinate your own preparation.  Because of this delay, many CPA’s and tax preparers are going to be backed up with more tax returns coming at once as we get into February.  Gather your information together as soon as possible and get it to your tax preparer.  That way he or she can have it ready to file as soon as the IRS is ready to process them.

We now offer professionally prepared tax return service.

Turning Point Financial can now assist you with your tax preparation and filing.  Most returns can be done for $125.00, including an itemized schedule A and your state filing.  Call today for an appointment 1-866-983-4222.  Extra fees apply if for schedule C, E, or F.

Thanks Washington.

The newly passed and signed 2010 Tax Act, formally named the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, includes several provisions that will affect taxpayers. Here is the information you need to know now about this legislation, formally named the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

Major Provisions

The new law

• postpones the sunset of the 2001 and 2003 tax cuts;
• reduces the estate tax;
• extends unemployment benefits;
• includes an alternative minimum tax (AMT) patch;
• continues through 2012 the lower capital gains tax rate introduced by the Jobs and Growth Tax Relief Reconciliation Act of 2003; and
• extends for two years the repeal of the itemized deduction phase-out and the personal exemption phase-out.

Provisions That May Affect You

Estate Tax

The Act temporarily reinstates the estate tax, with an estate tax rate of 35% and an estate tax exemption of $5 million (adjusted for inflation after 2011).

Payroll Tax

For 2011, the Act reduces the rate for the Social Security portion of payroll taxes to 10.4% by reducing the employee rate from 6.2% to 4.2%. The employer’s portion remains 6.2%.

Family

The Act extends several expired or expiring provisions affecting families, including the following:

• The increased standard deduction for married taxpayers filing jointly, which is scheduled to expire after 2010, continues for two years.
• The $1,000 child tax credit amount continues for two years instead of reverting to $500.
• The increased starting and ending points for the earned income credit continues for two years.
• The $3,000 amount for the child and dependent care credit, which was scheduled to revert to $2,400 after 2010, continues for two years.
• The American Opportunity Tax Credit continues for two years.

The Act also makes adjustments to the gift exclusion and generation-skipping transfer (GST) tax that will affect family giving:

•  The federal gift tax exemption is increased to $5 million for 2011 and 2012, up from $1 million in 2010.
• The GST tax exemptions are set at $5 million for 2011 and 2012. The exemption limit is scheduled to drop to $1 million beginning in 2013.

Business

The Act extends the 100% bonus depreciation for business property acquired after September 8, 2010, before January 1, 2012, and placed in service before January 1, 2012 (or before January 1, 2013, in the case of certain property). It also sets the expensing limitation under IRC §179 at $125,000 and the phase-out threshold amount at $500,000 for 2012. The Act then reduces these amounts to $25,000 and $200,000 for tax years beginning after 2012.

The temporary 100% exclusion of gain from the sale of certain small business stock under IRC §1202, enacted by the Small Business Jobs Act of 2010, is extended through 2011.

AMT

The Act includes an AMT patch for 2010 and 2011.

•  For 2010, the AMT exemption amounts will be $47,450 for unmarried individuals and $72,450 for married individuals filing jointly.
• For 2011, the amounts will be $48,450 and $74,450, respectively.

Needless to say, the 2010 Tax Act is still very new. It is only just being analyzed by professional advisers. The law is potentially subject to modifications by technical correction acts. In addition, provisions of the law may be interpreted by the Treasury Department issuing regulations and by the IRS issuing forms and instructions.

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Both sides of the isle voted last night to approve a 2 year extension of the Bush tax cuts.

Late last night, just before midnight in fact, Congress finally approved the Bush tax cut extension for two more years. This means that workers of all tax brackets will pay less in taxes than previously planned for 2011 tax rates. This includes an extension of the $1000 per child tax credit, tax breaks for college students, and lower capital gains and dividends tax rates. Also included is a 2% cut in the social security tax, which will go from 6.2% down to 4.2%. That means for someone making $100,000 per year, they will have an extra $2000 to take home. Overall, this should be a good thing for the economy and hopefully stimulate job growth in the end.

The downside of this is that there were not any spending cuts to offset the lower tax revenues that will be coming in. Government spending will continue at the same pace, which means our nation’s deficit will continue to grow. So basically, both sides of the isle got their way for now.

One obvious question that comes to my mind is this: With social security already on the brink of bankruptcy, should we really be cutting it’s funding?

I would love to hear your comments and opinions on this matter. Feel free to comment below. Your identity and contact information will not be visible on this site.

1.  Charitable donations

Making charitable donations has always been a great tax write-off for most folks.  Giving cash of course is always a qualified charitable donation.  But giving non-cash items to charity is also deductible.  When you donate items to places like Goodwill, get a receipt for your donation and record what you gave, and the approximate value of each item.  You’ll need to list out each item you gave with it’s value.  If you’re ever deducting more than $500 of non-cash donations, you’ll need to have this type of inventory available in your records.  Some people like to take digital photos of items donated as an extra protection just in case the IRS ever tries to question it.  Also, if you volunteer your time for a charitable organization you can deduct mileage that you drive to, from and during your service hours.  Keep track of those miles and you can write off 14 cents per mile for charitable miles driven.

2.  Child care credit

If you pay for child care while you work, you may be eligible to deduct up to $6000 for the care of 2 children.  You need to keep good records of these expenses, and don’t pay with cash.  It’s best to have cancelled checks to prove these expenses if you ever need to.

3.  Relocation for work

If you had to move because of a new job, or with your current employer, you should be able to recover some of your moving expenses if you can pass a few “tests”.  The first test is related to distance traveled.   Your new job has to be at least 50 miles farther from your old home than your commute from your old home to your old job was.   For example, if you used to drive a 25 mile commute to your old job, then your new home needs to be at least 75 miles away from your old home (25 mile commute plus 50 miles).  If so, then your move qualified for this deduction.  The second test is just proving that you have been employed after your move.  You have to have been employed for at least 39 weeks out of the 12 months following your move, in the vicinity of your new home.  You don’t have to keep the same job for that whole time, but you must be employed during that time.  If you’re self employed, then you have to work for 78 weeks in the 24 months following your move.

4.  Automobile tax credits

If you buy a hybrid gas-electric vehicle, or an alternative fuel vehicle before the end of 2010, you may qualify for this tax credit.  The amount of the credit varies with the type of vehicle that you buy and how fuel efficient it is.  The credit can range between $400 and $4000.  Some of the credit can be phased out as dealers sell a certain amount of cars.  So make sure you ask your dealer before you buy.  Also, the vehicle needs to be purchased for personal or business use, you cannot intend to resell it.

5.  Home energy efficiency improvements

If you’re going to spend money on home improvements, make sure you go with energy efficient options.  You’ll be able to deduct up to 30% of the cost, up to $1500 for these improvements.  This would include things like doors, windows, insulations, skylights, metal roofing, alsphalt roofing with cooling granules, water heaters, and heating & cooling systems.  I know $1500 won’t go far with these types of expenses, but every bit helps!

6.  Residential renewable energy tax credits

This is a tax break for money spent on renewable energy additions to your home.  This would include things like solar energy systems (including hot water heaters and solar electric systems), geothermal heat pumps, small wind turbine systems, etc.   This tax credit is also for 30% of the cost, but there is no upper limit on the amount.  So if you spent $30,000 on these types of systems, you could deduct $10,000!  That is pretty amazing.  

7.  Making work pay tax credit

This is a tax credit available to anyone who has a job, and 2010 is the last year it will be available.  The credit is equal to 6.2% of an individual’s earned income up to a maximum amount of $400, or $800 for a married couple.  This amount will be reduced by any economic tax recovery credit that you may have already received.  It also starts to get phased out if you’re an individual making over $75,000 or a married couple making over $150,000.  It’s not a lot, but it helps!

Don’t ever think that tax credits and write-offs are only for the rich.  All you have to do is donate, go to work, or go green, and you can get some money back from Uncle Sam.

The Bush tax cut extensions would  include many great benefits for both individual taxpayers and businesses alike.  Some of the details include:

• An extension of unemployment benefits for millions of jobless workers
• Payroll tax reduction from 6.2% to 4.2%
• Enhanced tuition tax credits for college tuition
• Tax breaks for businesses that hire new workers
• Top estate tax rate staying at 35% instead of going up to 55% as scheduled
• Estate tax exemption staying at $5 million per person (this is one of the Democrats major points of contention since it only affects the “super wealthy” taxpayers)

Democratic staff members are estimating that at least half of their members are currently opposed to the deal.  We will keep you posted as things progress and the final decisions are made.  They better hurry up since they will be going on break for the holidays soon!

By LAURA SAUNDERS

There are plenty of reasons for taxpayers to scream. Here it is, year-end tax-planning time, when investors must decide whether to take gains or harvest losses and make important retirement-account choices. Yet crucial questions remain—not only about next year’s tax law but also about this year’s.

If Congress doesn’t pass an extension of the Bush-era tax rates for upper-income earners, the top rate on long-term capital gains will rise by one-third next year—an increase that is double the rise in rates on ordinary income. The rate on dividends, meanwhile, could nearly triple. And many taxpayers are still waiting for answers on the 2010 alternative minimum tax, the estate tax and the gift tax.

Given all the uncertainty, is your annual year-end tax-planning session worth the effort this year? Yes—in fact it is crucial, because it could be your last chance to take advantage of today’s low rates.

Congress will address taxes in December, and may (or may not) clear up 2010 and 2011 issues before year-end. Advisers like Mark Nash of PricewaterhouseCoopers LLP in Dallas are urging clients to get ready to pounce once the law becomes clear. “We are making plans [for clients] now that can be executed quickly before the end of the year, or looking at moves—like Roth IRA conversions or installment-sale elections—that can be revised next year,” he says.

Even if Congress merely extends current law, understanding “wash sale” rules, loss-harvesting and Roth IRA conversions now can pay off later.

That is because the window is closing on current investment tax rates, now at historic lows. Already, many investors face a substantial tax increase in 2013 passed by Congress as part of the health-care overhaul. Every financial and political analyst interviewed for this story expects taxes on investments to rise more than taxes on wages in coming years.

The good news? Investors have enviable flexibility when it comes to timing income and deducting losses—far more than wage earners. There’s so much to say about investment tax planning that we’re saving other year-end tips for next week.

Capital Gains and Losses

If Congress extends the Bush 2001-03 tax rates for couples earning more than $250,000 ($200,000 for singles), then the top rate on long-term capital gains (those held longer than a year) will remain 15% for a year or two. If lawmakers don’t extend the current law, then on Jan. 1 the top rate on gains will rise to 20%.

What you can do. People with liquid investments should prepare to act quickly this year if the Bush cuts aren’t extended, or later if they are. That means understanding some important details of current law.

• Loss harvesting. If you sell an investment at a loss, you can use up to $3,000 per year of the loss to offset ordinary income like wages and “carry forward” the rest to shelter future investment gains. (Note: These rules apply only to investments held in taxable accounts, not tax-sheltered retirement plans such as individual retirement accounts and 401(k) plans.) Short-term losses are those from investments held a year or less, and long-term losses are from those held longer.

The rules on overall gains and losses are intricate but give investors room to optimize results. “Smart investors pay close attention to the timing of gains and losses in order to minimize taxes,” says independent tax analyst Robert Willens.

If tax rates rise next year, it may make sense to hold off taking losses until January, when their value will be greater. On the other hand, many investors still have losses they took during the terrible downturn of 2008. If they can take short-term gains this year, Mr. Willens suggests doing so to use some of those losses. This can often work with proper planning.

Why use the losses this year instead of next if tax rates are going up? Although the losses would in theory be more valuable next year, Mr. Willens and others usually advise using them as soon as possible, because the market could change and waiting too long could erode their value.

Here’s an example. Susan has $40,000 of losses left from 2008. This year, she has $50,000 of potential gains: $30,000 is long-term and $20,000 is short-term. She wants to use her loss and is worried about the prospects of the stock with the short-term gain. So she sells all the stock with the $20,000 short-term gain and enough of the long-term holding to realize $17,000 of gain.

The result: $37,000 of short- and long-term gains are sheltered this year, with $3,000 of losses left to offset her wage income. Why save $3,000 of the loss to offset wages? Because ordinary income is taxed at much higher rates than long-term gains, it’s a more lucrative offset.

• Understand the wash-sale rules. If you sell an investment at a loss, you don’t get the loss if you also buy the same holding 30 days before or after the sale. What many don’t know is that these rules apply only to losses, not to gains. In the above example, Susan was free to re-acquire the stock she sold right away at a higher cost basis, which will reduce her taxable gain in the future. As long as transaction costs are low, it often makes sense to “scrub” your gains if you have losses.

• Mix and match. When reckoning gains and losses, remember that those on mutual funds and exchange-traded funds can offset gains from stocks, and vice versa.

Tax strategist Robert Gordon of Twenty-First Securities Corp. in New York notes that many taxable bonds have appreciated as interest rates have fallen. If an investor holds individual bonds with long-term gains, he suggests selling the bonds, in effect converting interest payments taxable at ordinary rates to long-term capital gains with a top rate of 15%. If the investor buys the bond back right away, he should elect to deduct the premium from the interest payments over the remaining life of the bond.

What if you are selling an entire business instead of a liquid investment? Many are pushing to finish deals before the end of the year, says Mr. Nash. Failing that, he says, some people with deals under way are selling the business to a trust before the end of the year to take advantage of the 15% rate, and letting the trust sell it next year. This is a complex move but could be useful this year for people selling substantial assets who have a buyer.

Dividends

If lawmakers extend the Bush 2001-03 tax cuts for upper-end taxpayers, the top rate on dividends will remain 15%. If they don’t, the top rate may stay linked with the one for capital gains and rise to 20% (as requested by the Obama budget), or dividends will once again be treated as ordinary income, with a top rate of 39.6%.

What you can do. Individual investors can do little. Those who control companies can have them pay dividends before the end of the year. Several public companies, including Wynn Resorts Ltd., Limited Brands Inc. and Progressive Corp., have paid special or extraordinary dividends recently, ahead of possible changes next year.

Stock Options and Restricted Shares

So-called nonqualified stock options and restricted stock are now the most common forms of executive stock compensation. Employees who receive either type usually owe ordinary income taxes and payroll taxes (FICA) on the stock’s value at current market prices when they exercise the options or the restricted stock vests. If they continue to hold shares more than a year after that, appreciation is taxed at long-term capital-gains rates, without payroll taxes.

If the Bush tax cuts aren’t extended for all, the top rate on ordinary income will rise to 39.6% from 35% and on capital gains to 20% from 15%. In addition, there is the new 3.8% tax on investment income (described above) coming in 2013. The 2013 tax also adds a 0.9% payroll tax to the wages of couples making over $250,000 ($200,000 for singles). It would apply to income recognized when options are exercised or restricted stock vests.

What you can do. Plan not only for this year but also the next two, with the 2013 taxes in view. There is a lot to consider: ordinary tax rates, capital gain rates and holding periods, plus the stock’s current price and its future prospects.

Eddie Adkins, a benefits specialist with Grant Thornton LLP, says he sees savvy executives planning now to avoid the 2013 increases. Because it may be hard to come up with the cash required to acquire shares or pay taxes, many are doing “cashless” transactions in which some shares are sold in order to cover the costs of keeping others, he says.

One caveat: The wash-sale rules (described above) come into play here. A grant of options or restricted stock, or an option exercise, count as buying stock, so be careful not to harvest losses from the same stock within 30 days before or after.

Roth IRA Conversions

Roth IRAs are in many ways the gold standard of retirement accounts. Assets in them can grow and be paid out income-tax-free, and there are no mandatory distributions for the owner, as there are with regular IRAs. Tax-free Roth payouts don’t count in calculations for alternative minimum tax, Social Security tax, Medicare premiums or the 3.8% investment income tax coming in 2013, at least for now.

This is the first year all taxpayers may convert other IRAs to Roth accounts regardless of their income. Many have jumped to do it, even though that means paying full income taxes on the transfer. Roth sponsors have experienced a surge, with Fidelity Investments and Vanguard Group reporting four to five times the number of conversions as of this time last year.

A key Roth boon is that people who convert can reverse the transaction as late as Oct. 15 of the following year. This has led some to put different asset classes into separate Roth accounts with plans to undo the ones that have lost value or grown less. (See Tax Report, Aug. 14.) For 2010 only, investors may also split the conversion income and report half in 2011 and half in 2012, paying taxes at then-current rates. If the Bush cuts are extended, taking advantage of the deferral could make sense.

What you can do. Remember that Roth conversions work best when the following are true: Your tax rate will be the same or higher in the future; asset values have been beaten down; you have outside money to pay the tax; and you can transfer assets without moving into a higher tax bracket. In some cases, a conversion that raises income may help you avoid the alternative minimum tax.

Even a small conversion will start an important five-year clock running. Once the five years is up, Roth payouts of both principal and earnings are tax-free for those over 59½; if not, only payouts of principal are tax-free until five years is up. A December conversion starts this clock running as of the previous January.

But January is often a good time to convert to a Roth IRA, because this leaves the longest possible time to undo the conversion: almost 22 months. Those who convert in January 2011 will have almost until the 2012 elections to decide whether to undo the transfer.

Many taxpayers fear that if they pay to convert, Congress will change the rules in the future. The issues are many, but at least one expert familiar with tax theory and history, Columbia University Law School Professor Michael Graetz, plans a partial Roth conversion early next year.

“Waiting until next year gives until October 2012 to undo the conversion, and we should know more about where Congress is heading,” says Prof. Graetz.

For one group of taxpayers who want to save for retirement—those who don’t have current IRAs—a Roth conversion is close to a no-brainer. These investors can open a “nondeductible” IRA, put in up to $5,000—$6,000 if they’re at least 50—and immediately convert to a Roth IRA with little or no tax.

This strategy doesn’t work well for those who already have large IRAs, unless they’re converting all their accounts. That’s because partial conversions have to be prorated among pretax and after-tax IRAs. PricewaterhouseCoopers’s Mr. Nash notes that this move can work for executives who have earned too much to have a deductible IRA, and sometimes their spouses as well.

Do your tax planning now and you'll be glad you did come April 15th

Fall is the best time for last-minute tax planning because you still have plenty of time to meet end-of-the-year deadlines that can minimize your tax bill in the spring. Follow these five tips and you might even get some money back from Uncle Sam.

Bulk up your retirement contributions.

You can contribute up to $16,500 into your 401(k) in 2010; for those 50 or older, the limit is $22,000. If you’re nowhere close to that amount, you can ramp up your contributions to take advantage of tax-advantaged accounts. The same goes for Roth IRAs and traditional IRAs. If you want to max out your retirement savings, now is the time to start putting more money away. (You can contribute up to the 2010 limit until April 15, 2011.)

Check out any one-time benefits that might apply.

Investments in certain energy-efficient products, such as a new HVAC system, windows, or insulation, might be eligible for tax credits (for 30 percent of the cost, up to $1,500). You can check to see if you’ve made any eligible investments–or if you want to before the end of the year–by visiting www.energysavers.gov. If you purchased your first home this year, you might be eligible for the homebuyers credit of up to $8,000. Check the IRS website (www.irs.gov) to see if you might qualify and how you need to prepare. Saving and organizing all relevant paperwork is the first step.

Delay deductions.

Because tax experts say tax increases are likely in the future, they recommend saving big deductions until next year, if possible. So if you’re planning to make a sizable charitable contribution, for example, you might want to hold off for the sake of your tax bill. Similarly, if you have flexibility over when you receive income, you might want to get as much in the bank before December 31 so it counts as income in 2010, before any potential tax increases.

Check that you’ve been paying enough taxes.

If you received income beyond your usual paycheck because of freelance work or income from a side-business, then you might end up owing a lot of money in April. You’re also at greater risk if you got married this year and earn a similar, relatively high salary to your spouse. That’s because of the so-called marriage penalty, which often means dual, high-earning couples owe more when they file taxes jointly than they did when they were single.

People who earn significant chunks of their salary in cash also need to make sure they’re saving enough of that cash to pay the appropriate amount of taxes in the spring. The IRS keeps a close eye on people in professions that pay in cash, such as waiters, by using formulas that estimate expected income. If you report less, you could be flagged for an audit–not something you want.

A big tax bill can not only shock your budget–you might owe the government additional fines, too. Check to see if you’ve been paying roughly the correct amount of taxes by reviewing your payroll stubs or other documentation. If you’re going to owe money, prepare by starting to save now.

Keep track of important receipts.

If you run your own business, are self-employed, or have been spending money on educational costs to boost your career, then many of your expenses may be tax-deductible. Make sure you put your receipts in an easy-to-find filing system so you can claim them when you file your taxes next year. If your employer offers flexible spending accounts for healthcare costs, you also want to be sure to keep eligible receipts for doctor visits, pharmaceuticals, and other health-related costs. You often have until April 15 to file those claims.

Tax planning might not be as fun as Thanksgiving dinner & football games, but it can get you a much bigger wallet in the spring.

Obama is may extend Bush tax cuts even for those earning more than $250k per year.

By JOHN D. MCKINNON And JANET HOOK
President Barack Obama is open to considering the extension of all Bush-era tax cuts for a year or two, the White House confirmed Thursday, putting to a likely end any debate over whether to extend the breaks for high-income families.

Instead, Congress is poised to grapple with a different set of questions when it returns this month for a final session of the current term: How and for how long should lawmakers grant an extension?

Until now, Mr. Obama and Democratic congressional leaders have said they wanted to extend Bush-era breaks for the middle class only, defined as families making below $250,000 a year. Republicans and a growing number of Democrats favor extending the cuts for all income levels, including the highest, for some period of time. The cuts will expire Dec. 31 unless Congress extends them.

Mr. Obama dropped his explicit opposition to extending breaks on the top income brackets, saying Wednesday he was willing to negotiate with Republicans on the issue. Asked about it Thursday, White House Press Secretary Robert Gibbs said Mr. Obama would “be open to having that discussion.”

Also Thursday, Mr. Obama appeared to offer another hint that he’d be flexible on the issue. He emphasized the need for certainty on taxes, a recent rallying cry for Republicans and business advocates, and termed it “critical to maintain our recovery.”


“I take any signal that the president may be backing off his pledge to raise taxes on small businesses as a good sign, but we have to see where this discussion goes,” said Rep. Dave Camp (R., Mich.), in line to become chairman of the Ways and Means Committee in January.

Many small-business owners file under personal-income tax rates, and Republicans contend that allowing the Bush-era tax breaks on higher earners to expire would hit about half of small-business income. That could slow investment and job creation at a critical juncture in the sluggish economic recovery.

Senior Democratic aides suggested it would be all but impossible to pass an extension of only lower-income tax cuts, given opposition from both Republicans and some Democrats, although Democratic leaders could still bring it to a vote and force Republicans to vote against it. A higher cutoff for extending the breaks—say, annual income of $1 million—also remains an option.

But more Democrats appear set to part with their leadership and support extending all the breaks, at least for a period.

“I think there are a number of senators on our side who will at least listen very carefully to the analysis that would lead you to support a … one- to three-year phaseout of the upper-income tax breaks,” said Sen. Robert Casey (D., Pa.) in an interview late last week.

Many House Democrats still oppose extending the higher-earner breaks. But House Democrats are losing power following big losses in this week’s election, and likely would defer to whatever deal the White House and Senate can reach.

The debate is now set to focus on how lawmakers would design such an extension.

Some Democrats are considering combining a short-term extension for higher earners with a longer-term extension for middle-class earners—an approach aides term “decoupling.” Sen. Casey said a number of his Democratic colleagues were interested in that idea to give certainty to middle-class families while limiting the impact on the government’s already-large deficits.

Republicans said Thursday they opposed decoupling. One House GOP aide called it a nonstarter. It would allow Mr. Obama and congressional Democrats to simply let the higher-earner breaks expire in a year or two; with only the higher-income cuts at stake, Republicans would have little negotiating leverage.

“Decoupling is a tax hike, period,” said one Republican Senate aide.

Republicans want to keep the time frame on tax cuts the same for all income levels. The question then becomes whether lawmakers decide on a short-term extension of a year or two, or a longer-term extension of, say, five years.

The negotiations could drag on into January, when the newly elected 112th Congress is to be seated with much larger Republican numbers.

White House officials said Thursday, however, that they wanted to complete the debate before the Jan. 1 expiration of the Bush-era breaks, to avoid problems that would result, including higher withholding rates for tens of millions of working Americans.

To take advantage of tax perks and avoid tax penalties, you need to meet IRS deadlines. Some retirement savings accounts must be utilized by Dec. 31, 2010, to get a tax break this year, while with others you have until April 15, 2011, to make your 2010 tax year deposits. Here are five important retirement tax deadlines to keep in mind:

December 31, 2010. Many retirement tax moves must be made by the end of the calendar year. Contributions to 401(k) and 403(b) plans need to be deposited by Dec. 31, 2010, to qualify for a tax break this year. Workers can defer taxes on up to $16,500 in an employer-sponsored retirement account in 2010, a limit that jumps to $22,000 for employees age 50 or older this year.

Seniors were able to skip taking required minimum distributions from retirement accounts in 2009. But retirees over age 70 1/2 must take distributions from their pre-tax IRAs and 401(k)s this year by Dec. 31, 2010. Those who fail to withdraw the correct amount must pay a 50 percent tax penalty and regular income tax on the amount that should have been withdrawn.

Investors who wish to convert a pre-tax IRA to a Roth IRA or a traditional 401(k) to a Roth 401(k) in tax year 2010 must initiate the conversion by Dec. 31, 2010. Those who convert to a Roth in 2010 have the option to pay the income tax on the transfer this year or pay tax on 50 percent of the conversion amount in 2011 and the second half in 2012. In future years, all of the income tax will be due in the year of the transfer. Many people have already begun to utilize this one-time tax perk. Financial services firms including Bank of America Merrill Lynch and Vanguard have reported a significant uptick in conversions this year. Nearly 100,000 retirement savers converted traditional IRAs to Fidelity Roth IRAs in the first half of 2010, four times more than were rolled over during the same time period in 2009. The removal of income limits for Roth IRA conversions this year also contributed to the increase in transfers.

March 1, 2011. The simplest way to convert a traditional IRA to a Roth IRA is to have the trustee of your current account roll it directly into the new account. However, if you have an IRA distribution made out to you, you have about two months to deposit the full amount withdrawn into a Roth IRA before you will incur any early withdrawal penalties. “The money doesn’t necessarily have to go in the Roth in 2010, but you need to convert it within 60 days of the withdrawal,” says IRA expert Ed Slott, founder of irahelp.com and author of “Stay Rich for Life!: Growing & Protecting Your Money in Turbulent Times.” If you receive the distribution on Dec. 31, 2010, you have until March 1, 2011, to deposit your money in a Roth IRA and have the transfer qualify as a 2010 conversion.

April 1, 2011. Seniors who turn 70 1/2 in 2010 have the option to delay their first required distribution until April 1, 2011. However, retirees who delay the 2010 distribution until next year must take two IRA withdrawals in 2011: the 2010 withdrawal by April 1, 2011, and the 2011 withdrawal by Dec. 31, 2011.

April 15, 2011. IRA contributions for the 2010 tax year must be made by April 15, 2011. Many people wait until the last minute to make their deposits. Almost half (45 percent) of all IRA contributions are made in the 28 days leading up to the tax deadline, and a quarter of new IRAs are opened in April, according to Fidelity IRA data. If you make a contribution between January 1 and April 15, 2010, you should tell the financial institution whether you want the contribution to apply to the 2010 or 2011 tax year. “I actually tell my accountant that I want to make my contributions count as deferred income for 2010,” says Bedda D’Angelo, a certified financial planner and president of Fiduciary Solutions in Durham, N.C., about her typically last-minute April IRA contributions. If you do not specify which tax year you want the contribution to apply to, the bank can assume the contribution is for the current year. Early tax filers can claim a traditional IRA contribution before the deposit is actually made, but the money must be there by the due date of your return.

October 17, 2011. If you wish to undo a 2010 Roth IRA conversion, you have until Oct. 17, 2011, to move your money back to a traditional IRA. To do this you will need to amend your 2010 tax return and subtract the amount that you put back in the pre-tax account from your 2010 gross income. Says Slott: “If you convert any time in 2010, you will have until October 17, 2011, to change your mind for any reason.”

You can restart social security benefits to increase your monthly pay.

Many people choose to begin recieving their social security benefits at age 62, the earliest age possible. When you do this, you receive a reduced monthly benefit for the rest of your life. This is often a great idea, and I often recommend it to my clients if: 1. They could use the extra income to help them meet retirement expenses. Or 2. They have a family history of not living well beyond life expectancy. By waiting till full retirement age to start receiving your social security benefits, you get more money per month.

In some cases, it makes sense for you to restart social security benefits and thereby increase your monthly income. Doing this requires that you first pay back all of the social security benefits that you’ve received up to that point. Some experts say that doing this can increase your monthly benefits by as much as 76%. Here’s what you have to do to make this happen:

Consult your CPA or Financial Planner

You need to meet with your CPA or personal financial planner to help you make this decision. You will need to run some calculations to see if it makes sense for you to pay back a big chunk of money in exchange for a higher monthly benefit. This monthly benefit will be increased over time with inflation. So that’s a good thing. Also, the government doesn’t charge you interest on the amount you’re paying back, another good thing.

Consider the financial impact

Consider your general health and life expectancy before restarting social security.

Having to pay back all of your social security benefits all at once could be a huge amount of money. For example: let’s say you started your social security benefits at age 62 and you’re getting $1100 per month. If you’re not 66, you would need to pay back $52,800. Again, you don’t have to pay back any interest on this amount, so it’s like you’ve had an interest free loan from the government.

File the appropriate form

Now you need to file SSA form form 521, “Request for Withdrawal of Application.” Send the form, along with the the check for the full amount of benefits received, to the Social Security Administration. Once the form is processed, you’ll begin receiving the benefits you’re entitled to at your present age. For example, if you were born between 1943 and 1954, your full retirement age is 66. For each month before full retirement you began taking benefits, they are reduced by .75%. If you began benefits at age 62, you receive 75% of your full benefits. For each month you delay benefits beyond full retirement age, they are increased by .75%. If you restart social security at age 70 in this scenario, you receive 132% of your full benefits.

A word of caution

A few things you need to consider, and your personal financial planner should address this with you, is your life expectancy. If your family has a history of people living to or beyond life expectancy, then this strategy might make more sense for you. If you pay back all this money, and then you don’t live long enough to recoup your outlay of cash, then restarting social security was not a good deal. None of us know how long we’re going to live, but your family history should be a pretty good indicator of what is likely to happen with you.

The other consideration related to your health is that you may end up needing that lump sum of money for health care or long-term care needs. The last thing you want to have happen is you increase your income by restarting social security benefits, but then you run out of money early because you tied it up. Make sure you and your financial advisor consider all the options before electing to do this.