Year-End-Tips to Saving Money on Taxes

Dec. 2, 2010#151; -- Next year's income taxes are in limbo and many Americans are wondering how best to prepare for the approaching tax season.

The latest plea from Uncle Sam may not provide much help.

"I want to stress that it would be extremely detrimental to the entire tax filing season and to tens of millions of taxpayers if tax law changes affecting 2010 are deferred and then retroactively enacted in 2011," wrote Internal Revenue Service commissioner Douglas Shulman about the risk that Congress will fail to pass legislation before the end of the year. The delay could hold up refunds for 25 million people.

With deductions for teacher expenses and deductions for tuitions and fees tangled up with the hotly debated Bush tax cuts, the IRS is seeking to get the ball rolling on some tax incentives. "These tax provisions can be distinguished from other pending tax legislation because they are so critical to ensuring that taxpayers experience a smooth taxing filing season system," wrote Shulman.

Are you looking for clarity before 2010 ends? There's no guarantee, but "there's some tax moves that are good despite what Congress will do with tax laws," says Bob Meighan, a vice president at the tax software company TurboTax. "Taxpayers can invest in an IRA account until April 15 or invest in a 401K until December 31."

Here are some tips on what you can do:

Retirement Funds: An investment in your future is suggested by most tax experts. A retirement plan is an "easy deduction," says Patrick Cox, CEO at TaxMasters Inc. If your company is not participating, you should attempt to participate if at all possible. While there are some companies that require a wait time or require employees to wait until open enrollment, "a lot of companies will let you start at the end of the year or even on the next paycheck," says Cox. The money placed in a retirement account is typically not subjected to income taxes.