This is a year to pay careful attention to tax preparation. Congress passed several acts to stimulate the economy, provide disaster relief and modify or extend certain tax provisions. Tax advantages generally fall into three categories — reductions, deductions and credits; here are just a few.

1. Reductions
• Maximize personal deferrals to an employer’s retirement plan, such as a 403(b) or 401(k) plan. The general limit for 2008 is $15,500 (an additional $5,000 for those age 50 or better). Despite the volatility of the market, contributing toward retirement is still a prudent strategy for many taxpayers.
• Use all flexible spending account funds. There is time to gather receipts and file for reimbursement — even for procrastinators. Schedule needed checkups as soon as possible. About this time of the year, many providers (dentists and eye doctors) send reminders on using flex dollars. Those who respond sooner are likely to get the best appointment times.
2. Deductions
• Make a contribution to a traditional IRA. If both spouses are employed and aren’t active participants in certain employer retirement plans, the deduction is up to the lesser of $5,000 ($6,000 if age 50 or better) or 100% of the compensation that's includible in gross income. Don’t forget that non-employed spouses generally are eligible to contribute to a spousal IRA. Deduction eligibility also depends on adjusted gross income.
• Make use of the job search deduction. The unemployment rate grew significantly this year. Certain job-search activities may be deductible for taxpayers that itemize. Eligible job search expenses must exceed 2% of adjusted gross income. The job search must be in the same field at the same level as the job left. Expenses are deductible even if not hired.
• Charitable contributions are deductible if the taxpayer itemizes. A contribution of cash, check or monetary gift (regardless of amount) must be supported by either a bank record or a written communication from the qualified organization. Special rules apply to noncash contributions of more than $500.
• Qualified Charitable Distribution deduction was extended two years, thanks to the Emergency Economic Stabilization Act of 2008. This provision permits IRA owners, age 70½ or better, to make tax-free charitable gifts from their IRAs directly to eligible charities. An overall limit, generally $100,000, per IRA owner applies.
3. Credits
• The Saver’s Credit helps low- and moderate-income taxpayers that make voluntary contributions to an employer retirement plan or to an IRA. This credit applies to married individuals filing separately and single with incomes up to $26,500; married couples, filing jointly, with incomes up to $53,000; and head of household with incomes up to $39,750.
• The Earned Income Credit is a refundable federal income tax credit for low-income working individuals and families. To qualify, taxpayers must meet certain requirements and file a tax return, even if earnings are below the filing threshold. Earned income and adjusted gross income limits apply and maximum credit is $4,824 with two or more qualifying children; $2,917 with one qualifying child; and $438 with no qualifying children.
• First-time Home Buyers Credit, part of the Housing and Economic Act of 2008, is a new tax credit that applies to homes purchased after April 8, 2008 and before July 1, 2009. The credit is available even if the eligible taxpayer has no tax liability.

According to the IRS, nearly 4.1 million people fail to claim education tax benefits, such as the Hope Credit, Lifetime Learning Credit, Tuition and Fees Deduction, Student Loan interest deduction and the Exclusion for Savings Bond Interest. Eligible taxpayers have up to 3 years to file an amended return to claim these missed deductions.

Finally, the IRS reports that 279,000 economic stimulus checks and 104,000 regular refund checks, totaling $266 million, were undeliverable due to address errors. This underscores the importance of preparation and proofing. The IRS Web site provides a list of common filing mistakes. Among the most common, in addition to incorrect addresses, are missing or incorrect Social Security numbers, unsigned returns, math errors and failure to include all applicable schedules. Even tax preparation software cannot guard against some of these common errors. Preparation and careful proofing are perhaps the most vital of all tax tips.

This information should not be considered tax or legal advice. GuideStone stands ready to assist your organization as you work with your legal and tax advisers by providing resource information that you and your adviser may find beneficial.