Around tax-season, the common goal is getting the most out of your tax-refunds, although, all the IRS tax literature crammed with ever-changing tax laws, tax credits and deductions that you have to learn feels like an over-load of information. E-filing has made tax preparation simpler and is quickly becoming the norm–eight out of 10 taxpayers now e-file their returns according to the IRS. While professional advice is helpful and ensures that you get all the tax breaks specific to your situation, e-filing saves the extra bucks and provides a more speedy and accurate refund. If you prefer the advice, H&R Block reviews refunds for free at some branches if it was prepared on their website. Just in case, remember these quick tips from the (IRS) when e-filing for your taxes.
- Earned Income Tax Credits (EITC) are helpful for low-income families earning $49,078 or less. The amount you receive varies depending on your level of income and the number of dependents you support. The Internal Revenue Service (IRS) estimates that four out of five eligible workers and families get the credit. One in five people miss out on the credit because of failure to claim it or to file for taxes at all. Last year, the average EITC amount was around $2,200. Check the IRS website to see if you qualify by visiting IRS.gov.
- Child Tax Credits allows parents to receive up to $1,000 for each qualifying child. To qualify, a child must be a dependent, under the age of 17 before the end of the tax year and must have lived with you for half of the year. It is in addition to the Credit for Child and Dependent Care expenses (see below). An Additional Child Tax Credit is also available for individuals who get less than the full amount of the Child Tax Credit, and may give you a refund even if you do not owe any tax. Click on the following link for more information.
- The IRS reminds parents paying school expenses such as tuition and fees, course related books, supplies and equipment for their children to keep the receipts and learn about some of the tax benefits that can help offset college costs. These tax benefits include the American Opportunity Credit, Lifetime Learning Credit, Tuition and Fees Deduction, Student Loan Interest Deduction. Note: you can only choose to claim one of the credits per student in a single tax year. For more information visit the Tax Benefits for Education Information Center at www.irs.gov or check out Publication 970, Tax Benefits for Education, which can be downloaded at www.irs.gov or ordered by calling 800-TAX-FORM (800-829-3676).
- The Child and Dependent Care Credit can be claimed if parents pay childcare expenses for a child (your dependent) who is under 13 and is not able to care for him or herself while the parent is at work or looking for work. The childcare provider can’t be your spouse or anyone that you or your spouse can claim as a dependent. You will need to provide the name, address, and tax id number of the childcare provider (social security number) or of the childcare organization. Also, for information on a qualifying person for divorced or separated spouses view the Publication 503 (2010), Child and Dependent Care Expenses.
- The filing status determines whether you are eligible to claim other deductions and credits. If you are a single mother, instead of filing “Single” you may want to consider filing “Head of House Hold” to cut your taxes. The “Head of House Hold” is the person who provides financial support to one or more persons related to him/her by blood, marriage or legal adoption. View the IRS Publication 501 under filing status to see which one you should file under.
- Be sure to claim all taxable gross income–all money earned in the form of money, goods, property, and services that are not exempt from tax. It also includes part of your social security benefits, salaries, wages, tips, professional fees, other taxable employee compensation, net earnings from self-employment, strike benefits, any disability pay you report as wages and the amounts paid for scholarships See chapter 1 of Publication 970, Tax Benefits for Education.