ACT SOON TO BENEFIT FROM EXPIRING TAX BREAKS

A number of tax breaks are due to expire at the end of this year. Though Congress may renew some or all of them, there is no way of knowing if or when they will.

As part of your year-end 2011 tax review, consider whether any of these opportunities to cut your tax bill fit your situation.

* The option for deducting state and local sales taxes in lieu of deducting state and local income taxes.

* The above-the-line deduction for up to $4,000 of higher education expenses.

* The above-the-line deduction of up to $250 for classroom supplies purchased by teachers.

* The tax-free charitable contribution from an IRA of up to $100,000 allowed for taxpayers 70½ or older.

* 100% bonus depreciation on new equipment purchased by business.

* $500 energy credit for energy-saving expenditures for your personal residence.

* Section 179 expensing election on up to $500,000 of new or used business equipment purchases.

SOME BUSINESS MEALS ARE 100% DEDUCTIBLE

Are you watching what you eat at work? Though that may not seem like a tax question, how you account for meals can affect your business tax return.

IRS ISSUES GUIDANCE ON BONUS DEPRECIATION

Under the "Tax Relief Act of 2010," you may be able to write off the entire cost of business property placed in service this year, thanks to 100% "bonus depreciation.

REVIEW YOUR 2011 TAX PAYMENTS

Don't let penalties for underpaid taxes increase your tax bill next April. Check the total you've paid in for 2011 through withholding and/or estimated taxes. If you've underpaid, consider adjusting your withholding for the final pay periods of 2011 or increasing your remaining quarterly estimate. If you employ household workers, be sure your calculations include the payroll taxes you'll owe for them.

SHOULD YOU UNDO A ROTH TO SAVE TAXES?

Yes, 2010 was the year of the Roth, and you may have converted your traditional IRA to take advantage of the one-time option to postpone recognizing the income. As you know, half of the related tax bill will be due with your 2011 tax return.

End of story? Not exactly. You can still take advantage of a planning window that may save you money. Under the rules, you have until October 17, 2011, to change your mind about the original conversion.

The tax term for the "do-over" election is recharacterization. It works like this: Say the value of the assets you converted to a Roth during 2010 has declined. That means if you had waited until now to convert, you would have ended up paying less tax. Reversing your 2010 decision puts you back in the position you were in before the Roth conversion and wipes out your original tax liability.

Even better, you can still do another traditional-to-Roth IRA conversion after recharacterizing. While the option of splitting the income over future years is no longer available, you can achieve the same effect by reconverting over a multi-year period. Just be aware that time restrictions may apply on this strategy. For details or assistance, give us a call at (518) 798-3330.

IRS DROPS INTEREST RATES FOR FOURTH QUARTER

The IRS will pay 1% less on tax overpayments and charge 1% less on tax underpayments during the fourth quarter of 2011. For the calendar quarter beginning October 1, 2011, and ending December 31, 2011, IRS interest rates will be 3% on individual overpayments and 2% on corporate overpayments, 3% on individual and corporate underpayments, 5% on large corporate underpayments, and .5% (1/2 a percent) on corporate overpayments exceeding $10,000.

FILE BY OCTOBER 17 TO AVOID PENALTIES

Tick-tock. Time is almost up on that six-month extension you filed back in April to give yourself more time to complete your 2010 individual income tax return.

What happens if you fail to file your return by the extended due date?

One consequence: Unless a disaster-relief exception applies or you have a valid reason, you may be charged penalties and interest.

For example, the penalty for filing your return after October 17, 2011, is 5% of the amount of your unpaid tax, per month, up to a maximum of 25%. After 60 days, a minimum penalty of the smaller of $135 or 100% of the tax due applies.

In addition, a late payment penalty of ½ of 1% of the tax due may apply for each month or part of a month that you fail to pay the tax due until you reach the full 25%. The two penalties interact and can be combined.

You'll also have to pay interest on the tax due. During 2011, the rate on underpayment of tax was 3% in the first quarter, 4% in the second and third quarters, and back to 3% in the fourth quarter. The interest is compounded daily and can be charged on penalties.

Since the penalty and interest are based on unpaid tax, neither applies when your return shows zero tax due. Filing a return is still a good idea, however. Why? The general rule limiting the IRS to a three-year period for assessing tax begins when you file. No return means no triggering of the statute of limitations.

Give us a call at (518) 798-3330 if you think you may miss a deadline. We can help keep penalties to a minimum.

IRS PROVIDES TAX RELIEF FOR DISASTER VICTIMS

If you used Form 4868 to request a six-month extension to file your 2010 income tax return, be aware that your return must be filed by October 17, 2011. Generally, the IRS does not provide filing extensions beyond that date; however, victims of recent natural disasters have been given more time to file returns and pay taxes. This tax relief is part of the federal response to recent hurricanes on the East coast, wildfires in Texas, and severe storms and flooding in other parts of the country.

For updates on relief and areas covered, go to "Tax Relief in Disaster Situations" on the IRS website (www.irs.gov).