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Five Tax Credits that Can Reduce Your Taxes
From IRS Tax Tip Newsletter 2013-33
Five Tax Credits that Can Reduce Your Taxes
A tax credit reduces the amount of tax you must pay. A refundable tax credit not only reduces the federal tax you owe, but also could result in a refund.
Here are five credits the IRS wants you to consider before filing your 2012 federal income tax return:
1. The Earned Income Tax Credit is a refundable credit for people who work and don’t earn a lot of money. The maximum credit for 2012 returns is $5,891 for workers with three or more children. Eligibility is determined based on earnings, filing status and eligible children. Workers without children may be eligible for a smaller credit. If you worked and earned less than $50,270, use the EITC Assistant tool on IRS.gov to see if you qualify. For more information, see Publication 596, Earned Income Credit.
2. The Child and Dependent Care Credit is for expenses you paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent. The care must enable you to work or look for work. For more information, see Publication 503, Child and Dependent Care Expenses.
3. The Child Tax Credit may apply to you if you have a qualifying child under age 17. The credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return. You may be required to file the new Schedule 8812, Child Tax Credit, with your tax return to claim the credit. See Publication 972, Child Tax Credit, for more information.
4. The Retirement Savings Contributions Credit (Saver’s Credit) helps low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or a retirement plan at work. The credit is in addition to any other tax savings that apply to retirement plans. For more information, see Publication 590, Individual Retirement Arrangements (IRAs).
5. The American Opportunity Tax Credit helps offset some of the costs that you pay for higher education. The AOTC applies to the first four years of post-secondary education. The maximum credit is $2,500 per eligible student. Forty percent of the credit, up to $1,000, is refundable. You must file Form 8863, Education Credits, to claim it if you qualify. For more information, see Publication 970, Tax Benefits for Education.
Make sure you qualify before claiming any tax credit. You can always visit IRS.gov to learn about the rules. The free IRS publications mentioned are also available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
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Claiming the Child and Dependent Care Tax Credit
From IRS Tax Tip Newsletter 2013-34
Claiming the Child and Dependent Care Tax Credit
The Child and Dependent Care Credit can help offset some of the costs you pay for the care of your child, a dependent or a spouse. Here are 10 facts the IRS wants you to know about the tax credit for child and dependent care expenses.
1. If you paid someone to care for your child, dependent or spouse last year, you may qualify for the child and dependent care credit. You claim the credit when you file your federal income tax return.
2. You can claim the Child and Dependent Care Credit for “qualifying individuals.” A qualifying individual includes your child under age 13. It also includes your spouse or dependent who lived with you for more than half the year who was physically or mentally incapable of self-care.
3. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.
4. You, and your spouse if you file jointly, must have earned income, such as income from a job. A special rule applies for a spouse who is a student or not able to care for himself or herself.
5. Payments for care cannot go to your spouse, the parent of your qualifying person or to someone you can claim as a dependent on your return. Payments can also not go to your child who is under age 19, even if the child is not your dependent.
6. This credit can be worth up to 35 percent of your qualifying costs for care, depending upon your income. When figuring the amount of your credit, you can claim up to $3,000 of your total costs if you have one qualifying individual. If you have two or more qualifying individuals you can claim up to $6,000 of your costs.
7. If your employer provides dependent care benefits, special rules apply. See Form 2441, Child and Dependent Care Expenses for how the rules apply to you.
8. You must include the Social Security number on your tax return for each qualifying individual.
9. You must also include on your tax return the name, address and Social Security number (individuals) or Employer Identification Number (businesses) of your care provider.
10. To claim the credit, attach Form 2441 to your tax return. If you use IRS e-file to prepare and file your return, the software will do this for you.
For more information see Publication 503, Child and Dependent Care Expenses, or the instructions for Form 2441. Both are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
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Take Credit for Your Retirement
IRS Tax Tip Issue # 2013-27
Saving for your retirement can make you eligible for a tax credit worth up to $2,000. If you contribute to an employer-sponsored retirement plan, such as a 401(k) or to an IRA, you may be eligible for the Saver’s Credit.
Here are seven points the IRS would like you to know about the Saver’s Credit:
1. The Saver’s Credit is formally known as the Retirement Savings Contribution Credit. The credit can be worth up to $2,000 for married couples filing a joint return or $1,000 for single taxpayers.
2. Your filing status and the amount of your income affect whether you are eligible for the credit. You may be eligible for the credit on your 2012 tax return if your filing status and income are:
- Single, married filing separately or qualifying widow or widower, with income up to $28,750
- Head of Household with income up to $43,125
- Married Filing Jointly, with income up to $57,500
3. You must be at least 18 years of age to be eligible. You also cannot have been a full-time student in 2012 nor claimed as a dependent on someone else’s tax return.
4. You must contribute to a qualified retirement plan by the due date of your tax return in order to claim the credit. The due date for most people is April 15.
5. The Saver’s Credit reduces the tax you owe.
6. Use IRS Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Be sure to attach the form to your federal tax return. If you use IRS e-file the software will do this for you.
7. Depending on your income, you may be eligible for other tax benefits if you contribute to a retirement plan. For example, you may be able to deduct all or part of your contributions to a traditional IRA.
For more information on the Saver’s Credit, see IRS Publication 590, Individual Retirement Arrangements. Also see Publication 4703, Retirement Savings Contributions Credit, and Form 8880. They are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
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What to look for in a Tax Professional
The IRS recently published a list of things you should look for in a tax professional. They are a great reminder to anyone looking for a professional to prepare their tax return.
*All quotes below are taken from the article referenced above.
1. Check the preparers qualifications. “New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. “
I have a PTIN, a preparer tax identification number, a requirement of all paid tax return preparers. I am also a member of both the NAEA (National Association of Enrolled Agents) and the CSEA (California Society of Enrolled Agents). I also have a Professional Financial Planning Designation award by UCLA. I take continuing ed classes yearly to maintain my license.
2. Check the preparers history for any questionable activities. “Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.”
Check with the Better Business Bureau or IRS, ask me for referrals or check out my reviews on yelp.
3. Ask about service fees. “Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.”
In general you should avoid preparers whose fees are based on the percentage of the refund you receive. My fees are based on services provided, the amount of work involved in your return and hourly, depending on your situation, NEVER on the refund you receive.
4. Ask if they offer electronic filing. “Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return.”
I prepare all my returns electronically using my PTIN number unless the client requests a paper return or the situation warrants it.
5. Make sure the tax preparer is accessible. “Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.”
The core of my business if providing quality service to my clients, just ask them! I am always available by phone or appointment to answer your questions or explain parts of your return you don’t understand until you are satisfied.
6. Provide all records and receipts needed in order to prepare your return. “Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.”
I never complete a tax return without all the required documentation. I like my job and intend to keep it. Therefore I do not use illegal means or cut corners when preparing a return for a client. If I don’t have something I need, I’ll ask for it and will not file until I receive what is necessary to complete your return appropriately.
7. Never sign a blank return. “Avoid tax preparers that ask you to sign a blank tax form.”
Frankly any tax preparer who would ask a client to do this is insane. I always prepare a completed and professional prepared return before asking the client to sign. All my clients have the opportunity to review this return both on their own and with me, to ask any questions and clarify any points in the return. You sign when you are confident to do so.
8. Review the entire return before signing it. “Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.”
See question 7 above!
9. Ensure the preparer signs the return with his/her PTIN number. “ A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.”
I sign every one of my returns, including my daughters return, with my name and PTIN number. You receive a copy of your return, both to review it before signing as well as to keep for your own records.
10. Report abusive preparers to the IRS. “You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 from www.irs.gov or order by mail at 800-TAX-FORM (800-829-3676).”
I often have clients who have come to me from previous tax preparers who have done a bad job or caused problems for them with the IRS. There is nothing I enjoy more than helping these clients get out of any mess they are in and giving them the reassurance that with me, there will be no problems or issues. I haven’t been in business for 28 years for nothing. I care about my clients and strive to give them the best service and the best work. If you have been a victim of an unprofessional tax preparer I encourage you to take the advice of the IRS and report them. Labels: accounting Granada Hills, accounting northridge, File Personal Tax Return, Granada Hills Tax Professional, Personal tax services, Porter Ranch tax services, Tax preparation Granada Hills
Do you need to file a Tax Return?
There are times when you do not need to file a tax return, due to a variety of reasons one of which being your income is below the filing requirement. It is always advised to file in the case that you will receive a refund, in many cases due to withheld income tax. A few questions to ask yourself when determining whether or not you need to file: - Does anyone claim you as a dependent? - What is your filing status – single, married, widowed, etc? - Are you under or over the age of 65? - Is your gross income less than $9,350? - Will you owe social security and Medicare tax on tips you did not report to your employer? The IRS rules, exemptions and forms can be overwhelming. For most people the best way to make sure you filing properly is to meet with an accountant Granada Hills. I am licensed and trained to help you decipher confusing tax rules and code and help make sure you receive a refund or pay the least amount of taxes based on your individual situation. Consider your situation and give me a call (818)368.5374. I am here to answer any questions or help you in the process of filing your 2010 tax return.
Labels: accounting Granada Hills, File Personal Tax Return 2010, Personal tax services
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