Now that the 2008 filing season is over, it's a good time to take a look back and learn some lessons from this filing season that can help you next year. Many of this year's lessons arise each year, while others are unique to 2008. The following is a list of 10 top lessons individuals should learn from this just-completed tax season.

1. The 2008 economic stimulus payments. The 2008 economic stimulus payments are not the same as tax refunds. When the 2008 economic stimulus payments (aka "rebates") were first announced, many individuals mistakenly believed that the stimulus payments were an advance on next tax year's refund. An economic stimulus payment, however, is not the same as a refund from the IRS. It will not affect next year's tax liability. It's not taxable. Moreover, it will not increase your tax liability next year, when you file your return for the 2008 tax year.
   
   
2. The need to substantiate. "Prove it or lose it" still reigns supreme when it comes to maximizing your deductions. Recordkeeping is essential to make sure you get the deductions you deserve. To claim certain deductions, you need contemporaneous recordkeeping. Deductions for charitable contributions are subject to tough substantiation requirements and receipts for most business expenses are necessary. Failing to keep accurate records could cause you to miss out on a tax break.
   
   
3. Estimated tax underpayments. Not paying enough in estimated tax can hurt, as penalties and interest for failure to make estimated tax payments can be high. Taxpayers who are required to pay estimated taxes and fail to do so are liable for a penalties and interest. The penalty for underpayment of estimated tax is computed by multiplying the current interest rate for underpayments by the amount of any underpayment for the period of the underpayment. If you do not pay enough through withholding or estimated tax payments, carefully do the math this year to ensure you aren't unnecessarily subject to penalties and interest.
   
   
4. Stock losses. Remember, stock losses this year cannot be carried back to reduce the amount of gain you paid on last year's stock trades. If your net capital losses exceed $3,000, you can only take $3,000 of the loss in that tax year and must carry the remainder forward. Carried-over losses are used to reduce capital gains in a future year, and can be carried over until all used up. Such losses can also be used to offset up to $3,000 in ordinary income.
   
   
5. Alternative minimum tax. The AMT continues to pull in more and more middle income Americans. Without an AMT patch for the 2007 tax year, approximately 25 million households would have experienced an average increase in their tax bill of $2,500 caused by the AMT. It is anticipated that Congress will enact another AMT patch for the 2008 tax year.
   
   
6. Coordinated retirement savings. It's important to coordinate your retirement savings (and withdrawals) to maximize your savings. This also applies to your spouse and children who have earned income, too. Year after year, it remains essential for the health of your retirement to save as much money as you can in a retirement account such as a 401(k) or in an IRA. Additionally, you can reduce your taxable income by maximizing contributions to plans such as a 401(k) plan. Moreover, establishing a spousal IRA or an IRA for your children with earned income can also reduce your family's overall tax liability.
   
   
7. Fine-tuned withholding. Don't use your money to make Uncle Sam an interest-free loan. If you received a tax refund, you probably had too much money withheld from your paycheck. Consider fine-tuning your withholding so you only have as much withheld as you will owe.
   
   
8. Depreciation and expensing. Bonus depreciation and small business expensing under the Economic Stimulus Act of 2008 require careful planning. Not every business necessarily needs to take these incentives, just because they are offered for only one year. Carefully review your business needs together with your financial and tax obligations and positions before buying equipment or making other purchases to capitalize on the incentives.
   
   
9. Standard versus itemized deductions. As the standard deduction continues to increase, some individuals may find it more attractive to take it rather than itemize their deductions. The complexity and time-consuming nature of itemizing may make it unnecessary.
   
   
10. E-filing’s increase in prominence. According to the IRS, electronic filing continues to grow. The number of individual returns e-filed as of the end of March 2008, was up nine percent over the same time last year. Approximately 67.4 million tax returns have been e-filed as of April 4, 2008, according to the IRS. This is up from 61.3 million returns filed for the same period in 2007. However, the IRS's Free File system continues to be underused, despite a large number of taxpayers eligible to use it.

The information in this article is of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact Wipfli for more information on this subject and how it pertains to your specific tax or financial situation.