If your tax debt is more than you can handle, even after going through this list, act soon to get help from a qualified tax advisor or tax debt resolution specialist.
San Mateo, CA (Vocus/PRWEB) April 06, 2011
It is less than two weeks until the 2010 federal income tax filing deadline of April 18, but time still remains for taxpayers to capture all applicable credits and deductions and minimize their tax debt, according to Freedom Tax Relief.
“Whether taxpayers are ready to file a return or just getting started, now is still a great time to double check credits and deductions to be certain they are paying the correct amount of tax and avoiding tax debt,” said Jeff Staley, managing partner of Freedom Tax Relief, LLC. “Even taxpayers who have already filed should check these items. If someone identifies a major discrepancy, he or she can always file an amended return.”
Income tax returns offer two ways to reduce tax bills: credits and deductions. A credit cuts the amount of tax paid by subtracting part of that tax. A deduction reduces total taxable income, so taxes are levied on a smaller total. Some credits and deductions apply to everyone, but others are available only to those who itemize deductions.
Staley suggests taxpayers review these items:
1. Earned income tax credit. People who earn only a modest income benefit from this credit of around $40,000 for working families and $14,000 for childless individuals.
2. Child tax credit. Parents can claim a credit up to $1,000 per child, in addition to the exemption of up to $3,400 per dependent. Families paying child-care bills also may be eligible for up to $6,000 in child-care tax credits.
3. Credits for education expenses. The Hope credit is usually available for the first two years of college. The American Opportunity Credit lets college juniors and seniors claim up to $2,500 per student (based on modified adjusted gross income). Interest paid on student loans is deductible. And for young adults whose parents pay their student loan bills, the former student can still deduct the interest, as long as the parents do not claim him or her as a dependent.
4. State sales taxes. Taxpayers can choose to deduct either state and local income taxes, or state and local sales taxes. Those who made very large purchases might find the sales-tax deduction a better deal. The IRS website has a calculator to help figure the deduction.
5. Out-of-pocket charitable contributions. Taxpayers should keep receipts for gifts to nonprofits and check the last pay stub of 2010 for contributions deducted at work. Miles driven for charitable causes are deductible, too.
6. Moving expenses for a first job. Job-hunting expenses while looking for a first job are not deductible. But people who pay their own moving costs to get to the location (at least 50 miles away) can deduct moving costs, including a deduction for mileage, fees and tolls. The same applies to moving costs for any job in a new city.
7. Military reservists’ travel expenses. Members of the National Guard or military reserve can deduct travel expenses to get to some drills or meetings that are more than 100 miles from home and involve overnight stays.
8. Retirement savings credit. Low- or moderate-income earners can take this credit.
9. Estate tax on inherited IRA funds. Anyone who inherited an IRA from someone with an estate subject to the federal estate tax can deduct the amount of estate tax paid on the IRA assets received.
10. State tax paid last year. State income tax paid when last year’s return was filed can be deductible this year, along with state income taxes withheld from paychecks or paid via quarterly estimated payments.
11. Points paid on a mortgage. All points paid on a home purchase in 2010 can be deducted. Points paid for refinancing a mortgage can be deducted over the life of the loan. In the year the homeowner pays off the loan, the homeowner also generally can deduct all points not yet deducted.
12. Jury pay returned to an employer. Some employers continue to pay employees’ full salary while they serve jury duty. But sometimes, they require employees to turn over their jury pay. The IRS requires citizens to report jury pay as taxable income, so workers can deduct any amount they repaid to an employer.
13. Property tax. The property tax deduction does not require itemizing deductions. The IRS allows taxpayers to add $500 to $1,000 to the standard deduction if they paid property taxes.
14. Casualty losses in disaster areas. Taxpayers who claim the standard deduction can add in casualty losses if the loss occurred in a presidentially designated disaster area. The IRS website hosts updated rules.
15. Energy-saving home improvements. New windows or doors, insulation or high-efficiency heating or cooling in 2009 or 2010 might qualify for a credit. The tax credit for these energy-saving home improvements is 30 percent of the cost. The maximum credit is $1,500 in the 2009-2010 period. Check the IRS website for details.
Many of these credits and deductions are subject to income limitations or other restrictions. To learn more, visit http://www.irs.gov and/or consult a tax preparer. Also, for more information on understanding taxes, avoiding tax debt problems and finding tax debt resolution help, consumers can download, at no charge, Freedom Tax Relief’s consumer guide at http://www.freedomtaxrelief.com/four_steps.php.
"No one enjoys filing a tax return, but the situation is a little brighter when you are confident that you are receiving all the appropriate tax credits and deductions," Staley said. "If your tax debt is more than you can handle, even after going through this list, act soon to get help from a qualified tax advisor or tax debt resolution specialist."
Freedom Tax Relief (http://www.freedomtaxrelief.com)
Based in San Mateo, Calif., Freedom Tax Relief (FTR) provides tax representation services. Working directly with the IRS, FTR helps individuals and businesses prepare back tax returns, become compliant with the IRS, determine the optimal IRS tax resolution program and resolve tax problems. Since inception, FTR has achieved a savings rate of 87 percent on IRS-accepted offers in compromise. The company, which has served nearly 9,000 consumers since 2004, is a wholly owned subsidiary of Freedom Financial Network LLC.