Tax Tips for All Year
With it being tax season, I’m sure many people are thinking, now what?
First, you should understand what happened. If you ended up owing, understand why and how much. Plan so that it doesn’t happen again next year. The goal is to break even, you do not want a huge refund. This means that the government has held on to this money all year.
Second, store properly. Keep copies of your tax returns going back as many as 5 years in case there are any questions in future years.
Third, protect yourself against identity theft. Your tax returns contain every bit of personal information that an identity thief would love to have to cause trouble in your life. Pick up your copies from your tax preparer instead of having them mailed. Make sure your preparer keeps their copy of your return in a secure place.
Fourth, discuss payment options. If you owe more in your taxes than you can pay off, get on a payment plan and work hard to pay them off as soon as you can. The IRS charges interest on unpaid taxes so make paying them off a priority.
With summer around the corner, you’re probably going to need a place for your kids to go while you’re at work. These services may qualify for a tax credit that can reduce your federal income taxes. Reference the Child and Dependent Care Tax Credit.
1. You must pay for care so that you can work or actively look for work. You, your spouse, or child meet this during any month they are a full-time student, or physically or mentally incapable of self-care.
2. You must have earned income. This includes earnings such as wages and self-employment. Your spouse must also have earned income.
3. You must pay for the care of one or more qualified persons. Qualifying children who are 13 and under who you claim as a dependent must meet this test.
4. You may qualify for the credit if you pay for care at home (you may be a household employer), daycare or a day camp.
5. Credit is a percentage of the qualified expenses you pay for the care of a qualified person. Depending on income, it can be up to 35% of your expenses.
6. You may use up to $3,000 of the unreimbursed expenses you pay in a year for one qualifying person, 06 $6,000 for two+ qualifying persons.
7. Expenses for overnight camp or summer school tutoring do not qualify. You cannot include the cost of care provided by your spouse or a person you claim as a dependent.
8. Keep receipts and records to use when you file for next year’s taxes. Make sure to note the name, address and social security number of your care provider. You must report this information when you claim the credit on your return.
Courtesy of http://www.irs.gov
Five Tax Credits that can reduce your taxes:
-Tax credits help reduce the taxes you owe. Some are even refundable, which means even if you don’t owe tax, you may still get a refund.
1. The Earned Income Tax Credit: refundable credit for people who work and don’t make much money. It can increase your income by $6,044. Depending on your income, filing status, and the number of children in your family, you may be eligible for this credit.
2. The Child and Dependent Care Credit can help you offset the cost of daycare for children under 13.
3. The Child Tax Credit can reduce the cost you pay for each qualified child (under age 18) you claim on your tax return by as much as $1,000.
4. The Saver’s Credit helps workers save for retirement. If your income is/less than $59,000 and you contribute to an IRA or a retirement plan at work.
5. The American Opportunity Tax Credit can help you offset college costs and is available for four years of post-secondary education. It is worth $2,500 per student enrolled in at least one academic period.
For more information on reducing taxes, please visit http://www.irs.gov/uac/Newsroom/Five-Tax-Credits-That-Can-Reduce-Your-Taxes to help you save as much money as you can on your taxes.
Unemployment facts: Times are tough and if you have recently lost your job, we have some facts from the website about unemployment for you:
1. You must include all income for the year. Use form 1099-G, Certain Government Payments. It will show how much paid to you and, if any, federal income taxes withheld.
2. There are many types of unemployment compensation. They include any amount you may have received from a compensation law of the U.S. or the state.
3. You must include all benefits paid to you from regular union dues in your income.
4. You may choose to have federal income tax withheld from your unemployment with form W-4V, Volunteer Withholding Request. If you do not want to have tax withheld, you may have to make estimated payments throughout the year.
5. If you are struggling financially, you may be eligible for some tax credits such as the Earned Income Tax Credit. The IRS can take steps to help ease financial stress.
Make sure you get your tax preparers background.
If they have a PTIN (preparer tax identification number)
If they’ve prepared a tax return before
If they know the requirements of the state and localities where you’re required to file
What records and documentation you’ll need to bring
How the preparer determines their fees
When you’ll receive a copy of your return
How to find/make a change if need be once tax season is over
If you haven’t already received your W-2 form by mid-February and you fear that it may be missing, here are some steps for you to take:
1. Contact your employer, or any employer you may have had during the year, and ask for a copy of your W-2.
2. If your employer may not be cooperating, contact the IRS at 1-800-829-1040. You will need your:
- Name, Social Security number, phone number
- Employer’s name, phone number and address
- Dates in which you worked and an estimate amount of money you made while working, and federal income tax withheld in 2014
3. File on time. The hard deadline is April 15, 2015. If you need more time, you can apply for a 6 month extension
Visit http://www.irs.gov for more help and information on your taxes.