March 24th, 2006

Behind the Headlines
This Issue: Preparing Your 2005 Taxes
By Jennifer Lane CFP and John Perkins

It is once again tax season - everyone's least favorite time of the year…

Here are a few quick reminders of changes and things to keep in mind when preparing your taxes for 2005:

* First and foremost, your taxes are due on APRIL 17, 2006 - you get two extra days since April 15th falls on a Saturday! Those who file their taxes with the IRS in Andover, MA have until April 18, 2006 to do so because of the Patriot's Day holiday in Massachusetts! If you know that you will not meet this deadline make sure to file for an extension using form 4868. You still have to send in any taxes due, but you get more time to complete your return.

* Taxes can be filed electronically and submitted online. Experts tell us that online submissions result in fewer errors, and - if you're due one, you'll receive your refund more quickly.

* There are some organizations that claim to speed the tax return process for you by using your credit card for payments (officialpayments.com and 1-800-2PAY-TAX), but don't be fooled. You will be charged a fee of 2.49% of your total tax payment for this service. E-file with direct deposit is fast; don't waste money on the extra credit card fee.

Here are some 2005 tax deductions and changes you may not know about:

Charitable contributions -
Gather your receipts for cash contributions and non-cash contributions (clothing, furniture, etc.) or document everything that you donated, the organization that received it, and the date it was given. Save these records.

Hurricane Katrina -
Cash contributions made between August 28, 2005 and December 31, 2005 to hurricane relief organizations are 100% deductible.

Child Dependents -
A child is no longer considered a "qualified dependent" if:

* He/she turned 19 by the end of 2005.
* He/she is a full-time student and turned 24 by the end of 2005.
* But -- an older child may still qualify as a dependent if they meet certain other requirements and do not earn more than $3,200 annually.

Gas -
We all felt the pain of the hike in gas prices after the hurricanes hit. The deduction for business purpose gas is $0.40 a mile for the months of January through August and $0.48 a mile for September through December.

Retirement Contributions -
There is still time left to make 2005 tax-deductible contributions to traditional IRA's and SEP-IRA's, and 2005 after-tax contributions to Roth IRA's up until the time you're required to file your 2005 return, not including extensions. Check guidelines for these IRA's to see if you qualify. In 2005 and 2006, the maximum contribution to an IRA is $4,000, unless you are 50 or over. Those 50 or over can put in an additional catch up amount of $500 for 2005 and $1000 for 2006.

There are plenty of other deductions out there - these are some of the important ones we want to point out to you. If you have any questions; give us a call.

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