Tax Tips for the 2010 Season
Taxpayers will have until April 18 to file their taxes this year. Automatic extensions give filers until October 17 to file their returns. Although an extension gives an extra six months to file a return, taxes must be paid by April 18 or penalties and interest will be assessed.
Taxpayers filing a Schedule A, Educator Credit, or Higher Education Tuition and Fees Deduction (Form 8917) will have to wait a little longer to file their returns this year. Recent tax law extensions will delay the processing of returns affected by these changes. Estimates say systems will be in place by mid to late February. Filers eligible for the American Opportunity Tax Credit and the Lifetime Learning Credit will not be affected by this delay.
Although the Making Work Pay credit is gone and income tax withholding reverts to normal withholding rates, taxpayers will see a reduction in their Social Security Tax this year. Workers usually have 6.2% withheld for Social Security Tax. This year the rate has dropped to 4.2%.
Congress has extended many of the tax credits and deductions that were scheduled to expire. While some of the popular credits have been reduced or eliminated, many of the credits will continue to be available for 2 more years.
Taxpayers who e-file their return and request a direct deposit typically receive their refunds 2-3 weeks quicker than paper filers. The IRS is working towards acknowledging your return in a matter of minutes and processing your direct deposit refund in as little as 5 days.
The Additional Child Tax Credit is a refundable credit, which means taxpayers owing no taxes may still qualify for a refund for this credit.
Taxpayers who claimed the original First-Time Homeowner Credit ($7,500) on their 2008 Returns will have to start repaying the credit on their 2010 returns. Affected taxpayers should receive a notification from the IRS about the repayment requirement.
Everyone likes getting a tax refund, but did you ever consider a refund is like a return of your money that you have loaned to the government, interest free! Make sure you are withholding the right amount and the extra take home pay is in your possession.
Taxpayers entitled to Earned Income Credit can choose to receive advance Earned Income Credit in their paychecks throughout the year.
Owe taxes? File your tax return electronically early and defer your tax payment using ACH bank debit until April 18. You will know how much you owe in taxes and have an opportunity to set aside the money before the scheduled debit date. Put the money into a savings account and earn a little interest while you're at it.
Choose an Enrolled Agent to help you file your taxes. Enrolled Agents have technical expertise in the field of taxation and are empowered by the U.S. Treasury to represent taxpayers in tax audits, appeals, and collection proceedings. Enrolled Agents specialize in tax matters and must complete extensive Continuing Education Courses to maintain their enrollment.
Keep receipts for your tax deductions. Mileage logs are a must if you plan to claim vehicle expenses on your return. The log needs to show the business miles traveled, date, destination, and business purpose for the deduction. You need to have the log prior to filing your return.
Overlooked tax deductions or credits you are entitled to is just like throwing money away. Childcare expenses, student loan interest, tuition, job-hunting costs are just a few of the commonly overlooked deductions. Using a tax professional could save you a lot of money. The fee you pay a tax professional could be a lot less than the tax savings you realize. (Plus the tax prep fee might be deductible too!)
