Welcome to Our Tax Tips Newsletter:
Continuing our effort to provide you with valuable, practical tax information, we will periodically update this page with useful income tax tips and income tax advice from the best sources -- information on issues that you commonly deal with. Be sure to check our newsletter from time to time to stay on top on of the latest and most effective tax strategies.
CompleteTax will provide income tax tips that will help you save money when it's time to file your tax returns. It's a good idea to use a well planned strategy so that you aren't surprised in April. Using CompleteTax Income Tax Preparation Software and keeping good records could mean the difference between paying a large chunk of money in April and receiving a big refund check. Use our income tax tips as part of your ongoing preparation.
Many More May Qualify for EIC in 2009
|
|
It is a sad day in the world of taxes when a taxpayer misses out on a tax credit or deduction that would reduce tax liability and result in a refund simply because he or she doesn't know about it. Being uninformed is a huge disadvantage for American taxpayers in an environment where so many obscure credits and deductions are available to put money in your pocket.
The Earned Income Credit (the EIC) is one of those strange credits that can result in cash in the pocket for many taxpayers. As a refundable federal income tax credit for low to moderate income working individuals - employees and small business persons alike - the credit can be paid to you even if you owe no income tax. Many people have had a tough year in 2009, with job losses or weakened and reduced earnings. Therefore, many taxpayers may qualify for the EIC for the first time in 2009, and may not even be aware of it.
But you only receive the credit you qualify for if you claim it on your tax return. To qualify, you must meet certain requirements. To claim it, you must file a tax return, even if you did not earn enough money to be obligated to file a tax return. And, if you have qualifying children, you must complete Schedule EIC and attach it to your tax return in order to claim the credit.
The EIC is one of the federal government's largest benefit programs for working families and individuals. Last year, nearly 24 million people received $50 billion in benefits. The average credit was more than $2,000.
In order to qualify for the EIC for 2009, your earned income and adjusted gross income must each be less than:
- $43,279 ($48,279, if married filing jointly) if you have three or more children;
- $40,295 ($45,295, if married filing jointly) if you have two children;
- $35,463 ($40,463, if married filing jointly) if you have one child; or
- $13,440 ($18,440, if married filing jointly) if you have no children.
The maximum tax credit for 2009 depends on both your adjusted gross income and on the number of children you have. The amount of allowable credit is phased down as income increases, and is phased out as your income exceeds the income limits listed above.
- If you have three children, your credit could be as high as $5,657;
- if you have two children, as high as $5,028;
- if you have one child, as high as $3,043;
- and if you have no children, $457 is the maximum credit.
To learn more about the impact of the EIC on your 2009 tax bill, please read Many More May Qualify for EIC in 2009 .
|
Income Tax Tips from the 2012 Tax Guide
Business-Related Records
For business owners, keeping good records takes on special significance, since it's only by keeping a watchful eye on your operations that you can determine whether your business is on the right track. There are several reasons why you need a good financial recordkeeping system for your business, not the least of which is proper accounting for sales and income tax liabilities. To learn more about good recordkeeping, please read Business-Related Records.
Contributing to Your IRA
You can contribute to your retirement IRA in 2009 or 2010 the smaller of $5,000 or an amount equal to your earned income (wages, salaries, commissions, net self-employment income, and other sources) for the year. An IRA can be established, and a contribution can be made, for a year after year-end but no later than April 15 - the original due date for filing the income tax return for that year. Also, if you have reached at least age 50 you can make an additional $1,000 "catch-up" contribution for a year. To learn more about the tax benefits from IRA contributions, go to Contributing to Your IRA.
The Credit for Child and Dependent Care
Congress and the IRS both recognize that in many situations you have to spend money to make money. This is especially true of working parents, many of whom would find it impossible to look for a job, let alone actually work at it, without paying someone to look after their children or an aged parent or a disabled relative. To lighten some of the extra burden that falls upon working parents and those caring for disabled dependents, Congress has provided the child and dependent care credit. For more details on how to qualify for and claim this tax credit, take a look at The Credit for Child and Dependent Care.
The Earned Income Credit
A special tax credit, known as the earned income credit or EIC, is available to lower-income taxpayers who have at least some earnings from employment or self-employment during the year. The credit is available to workers between the ages of 25 and 64, but eligibility is restricted on the basis of adjusted gross income (AGI). Depending on your AGI and the number of children you have, you could be eligible for a credit of up to $5,657. To learn about qualifying for and claiming the EIC, please review The Earned Income Credit.
|
Tax News
Deduct Haiti Relief Donations on 2009 Return
A taxpayer may now accelerate income tax benefits for any cash charitable contributions they make in January or February of 2010 to Haiti earthquake relief programs by claiming a deduction on their 2009 income tax returns. To learn more, please read Deduct Haiti Relief Donations on 2009 Return.
2010: A Tempting Time for Roth IRA Conversions
Changes in the tax law make 2010 a particularly tempting time to think about converting your traditional IRA into a Roth IRA. The logic goes that you can save money in the long run by paying more taxes today. And with most observers agreeing that tax rates are likely to do nothing but rise after 2010, it really may be the right time to convert, if you've been considering the possibility. To find out more on this tax planning idea, read 2010: A Tempting Time for Roth IRA Conversions.
Don't Forget to Claim Your 2009 Making Work Pay Credit
The IRS has issued a list of 10 tips to assist working taxpayers who are eligible for the Making Work Pay Tax Credit on their 2009 tax returns. The goal of this tip list is to ensure that taxpayers receive the entire amounts for which they are eligible. The tips include clarification that taxpayers filing Form 1040 or 1040A must use Schedule M to calculate the credit, while taxpayers filing Form 1040-EZ merely use the worksheet for line 8, which is located on the back of the Form. For more on how to claim the credit, read Don't Forget to Claim Your 2009 Making Work Pay Credit.
Last, Best Chance for Homebuyer Credit
It's not often that the IRS allows you to complete a financial transaction in one year and apply the tax benefit from the transaction to reduce your taxes in the prior year. But the first-time homebuyer tax credit is an anomaly, and these next few months may be the last, best chance to qualify for the credit. Not only can you qualify for the $8,000 "first-time" homebuyer credit - or the $6,500 credit "long-time resident" homebuyer credit - but you can claim the credit on your 2009 tax return for an immediate tax benefit. To learn more about how this works to your benefit, go to Last, Best Chance for Homebuyer Credit.
|
