2. Is there any way to reduce taxes after the year is over?

Unfortunately, there are only a few post-December 31st planning opportunities available to individual taxpayers. The one significant deduction available through April 15th of the following calendar year is a $5,000 contribution to a traditional IRA account. Taxpayers over the age of 50 can contribute an additional $1,000. Even if you are covered by an employer plan, you may still make this contribution as long as your income level is below certain limits. Another viable option is to make sure you maximize your itemized deductions. Look through your receipts and take every deduction possible for the year. In particular, make full use of all home office and business expenses.

A self-employed person may generate a deduction by adopting a retirement plan. There are many types of plans that allow you to put more money away than an IRA. Once established, you have the opportunity to make contributions after the end of the tax year.

For the future, it is important to keep in mind that most deductible expenses are an economic loss to you in that the average taxpayer has to spend around $3 to save $1 in taxes. In this example, it is easy to see that it is not a good idea to incur expenses just to save taxes.

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