Maybe I Can Still Beat the Tax Man?

The frequent commenter that posts anonymously but signs her comments "Rache" is one of my co-workers. Not only does she read about my latest obsessions here, but she also gets the added privilege of hearing about them during the day at work. Usually, when she's had enough, she sends me an article that either supports or refutes my claims and attempts to secure herself a few moments of peace. To be honest, it is not a bad plan at all.

When she finally tired of hearing me moan about having to plunk down some dough with my federal tax return, she sent me this article from MSN. Apparently, I am not the one banging my head against the wall this tax season.

I had thought about most of the ideas brought forward before I read them in this article. Unfortunately, I don't have a "green" car, nor did I install energy efficient windows last year. I didn't pay college tuition, either. For that matter, most of the discussion points from the article are things that you would have had to do back in 2006 to have any effect on your tax return now....except one. And, I can actually take advantage.

This will cause a collective :gasp: from the personal finance blogging community....but, I have not yet contributed to my 2006 IRA. I still have a traditional (deductible) IRA. I don't make the maximum contributions because, quite frankly, I cannot afford to stash an additional $4,000 away - with no real ability to touch the money for another 30 years. I would love to - but, I just cannot afford another $4k for retirement savings. But, what if I were getting a discount on the money invested in the IRA? In essence, that what will happen, if I contribute.

TurboTax estimates that for every dollar of deduction that I have, I will save about 18 cents in taxes. So, for every $1,000 deposited into my IRA, it will really only cost me $820 out of my pocket. Since I need to pay Uncle Sam anyway, the money really is discounted. If I were getting a refund, the same theory might be true, but it would have less of a real effect on my thinking. Crazy, isn't it? Sometimes logic has less to personal finance than "personal" has to do with finance.

Still, where am I going to come up with the $1,500 it will take to alleviate my tax bill? While TECHNICALLY I have the cash to make the contribution, it would be coming from money that is earmarked for something else. I do have about $1,000 worth of Motorola stock that I could deposit (actually, I am not sure if I can contribute stock directly and I must be losing my touch with "The Google," because I have yet to find a concrete answer). I just don't know how to apply the tax issue, and I need to make a phone call to TD Ameritrade, the folks who hold my IRA account. Can I deposit the stock directly? What is the amount that is deductible? The tax basis? The fair market value? Would I be better off to sell the stock and just deposit the proceeds (seems like it makes less sense to pay an extra set of commissions to buy and sell, but it wouldn't be the strangest thing I have ever heard)? Of course, another day in the market like today, and I won't need to worry about it, as the MOT stock is just plummeting, of late.

I need to get this situation squared away soon, and still figure out where the difference between what I own in stock and what I still need to contribute to abate my tax obligation is going to come from. The clock is ticking, though, and with one month to go until the filing date, I have little time to secure additional funding.