Save on Taxes!
Posted on March 2, 2012 by bob in Financial
Did You Know?
– Because of a holiday, the 2012 tax deadline is April 17.
– Everyone can do their taxes for free with IRS Free File.
– Earned Income Tax Credit (EITC) is for working families, yet 20 percent overlook it.
– Eighty percent of taxpayers get a refund.
– IRS2GO is a new smartphone app that lets you track your refund.
– No phone? Visit “Where’s My Refund?” at www.irs.gov.
– The official website, www.irs.gov, has a new look, and the latest info.
Who isn’t looking to save a little money these days? Here are some easy ways you can save money on preparing your taxes, as well as ways you might be able to pay out a little less.
IRS Free File: More Savings, Less Taxing
Looking for a fast, easy and free option to do your taxes? IRS Free File allows everyone to prepare and e-file their federal tax returns for free. And, the step-by-step, brand-name software offered by IRS’ commercial partners helps you find the tax breaks you are due.
Each of the approximately 20 private-sector partners tailor their offerings based on criteria such as income, age or state residency.
If you need help finding a Free File match, just select the “get help finding a Free File company” as your option. Simply enter a little information about yourself and the matches will appear. Some also offer state returns for free or for a fee.
– While all the companies have different criteria, if you made $57,000 or less in 2011 – and that’s 70 percent of us – you will be eligible for at least one free tax software program.
– If your income was higher than $57,000, you can still prepare and e-file your return for free by using Free File Fillable Forms. This is the electronic version of IRS paper forms. It’s more basic and is probably best for people comfortable preparing their own paper tax returns. It does not support state tax returns.
Just go to www.irs.gov/freefile to get started.
Organize Records
The IRS recommends keeping all tax-related documents for three years, in case of an audit. Keeping track of income-related documents can help you take full advantage of deductions available to you. If you don’t have the information, you might be losing out on money.
What should you have handy when it’s time to fill out this year’s returns? Records such as:
– A copy of last year’s tax return
– Valid Social Security numbers for yourself, spouse and children
– All income statements, i.e. W-2 forms, from all employers
– Interest/dividend statements, i.e. 1099 forms
– Form 1099-G showing any state refunds
– Unemployment compensation amount
– Social Security benefits
– Expense receipts for deductions
– Day care provider’s identifying number
Find Out if You are Eligible for the EITC
No tax benefit offers a greater lifeline to working families than EITC. Yet, one out of every five eligible taxpayers fails to claim it, according to the IRS. Because of the economy, even more people may be eligible if they have had changes in their earned income.
Here are a few things to keep in mind:
– The amount of qualifying income depends on your situation. For example, married workers, who earned $49,078 or less from wages, self-employment or farm income last year, are filing jointly, and have two qualifying children, could be eligible. The maximum credit for 2011 tax returns is $5,751 for workers with three or more qualifying children.
– Eligibility for the EITC is determined based on a number of factors including earnings, filing status and eligible children. Workers without qualifying children may be eligible for a smaller credit amount.
– You must file a tax return, even if you do not have a filing requirement, and specifically claim the credit. Those who typically fail to claim the EITC include rural workers and their families; non-traditional families, such as grandparents or foster parents raising children; taxpayers without qualifying
children; individuals with limited English proficiency; and taxpayers with disabilities.
– If you claim EITC, it can be complex so try to avoid the common errors such as mistakes on income amounts, filing head of household when you should file as married, or claiming children who have not lived with you for more than half the year.
– If you use a paid tax return preparer, make sure to seek out a reputable one. Tax professionals must sign returns they prepare and use their Preparer Tax Identification Numbers.
To learn more about EITC, go to www.irs.gov/eitc and use the EITC Assistant, or ask your tax professional. All EITC claimants are eligible for free tax help from the 12,000 volunteer sites nationwide or to use Free File at www.irs.gov/freefile.
Volunteer Income Tax Assistance
If you need personal assistance to prepare your tax return, there are 12,000 Volunteer Income Tax Assistance (VITA) sites nationwide.
These sites offer free help to those earning around $50,000 or less. To locate the nearest VITA site, search for “VITA” on IRS.gov. Tax Counseling for the Elderly (TCE), which is supported by AARP, offers free tax help to people who are age 60 and older. To locate the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP.org.
EITC Rules: Are You Eligible?
– Your adjusted gross income cannot be more than the limit.
– You must have a valid Social Security number.
– Your filing status cannot be “Married filing separately.”
– You must be a U.S. citizen or resident alien all year.
– You cannot file Form 2555 or Form 2555-EZ.
– Your investment income must be $3,150 or less.
– You must have earned income.
