12 End-of-Year Tips from the Tax ManDecember 8th, 2010 at 3:20 pm by Susan Hogan under Consumer, General Talk
Planning now may give you the gift of time and money saved next year!
1. Get Your Records Together
With the current tax year “winding down,” the Internal Revenue Service is encouraging taxpayers to gather and organize their tax records now to reduce stress at tax time. As your tax documents (W-2’s, 1099s, etc) arrive, file them together so you won’t have to search when you begin to file your tax return. You should keep any and all documents that many have an impact on your tax return. Generally, tax records should be kept for three years, but some documents, for example, records relating to a home purchase or sale, stock transactions, IRAs, rental property or a business, should be kept longer.
2. Get Information about your Federal income tax withholding and the Making Work Pay Credit
The IRS encourages all taxpayers to periodically check their withholding in order to ensure they are meeting their requirements. Due to the Making Work Pay credit, extra emphasis is being given for taxpayers who fall into any of the following groups to review their tax withholding and ensure enough tax is being withheld.
• Married couples with two incomes
• Individuals with multiple jobs
• Social Security recipients who also work
In 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for eligible working individuals and up to $800 for eligible married taxpayers filing joint returns.
If you find you need to adjust your withholding, submit a revised Form W-4, Employee’s Withholding Allowance Certificate to your employer. An automated IRS withholding calculator is available at IRS
3. Get Information on Updating Your Name and Social Security Number
If you are married or divorced in 2010, make sure you report any name change to the Social Security Administration before you file your tax return. If your name doesn’t match your social security number, your refund can be delayed. To get more information about updating your name change visit the SSA Website at social security or call 800-772-1213. And, report any address change to the Postal Service, your employer and the IRS to make sure you get tax-related items.
4. Get information about the First-Time Homebuyer Credit and Long-Time Resident Credit
Eligible first-time homebuyers who purchased a home on or before Apr. 30, 2010 or entered into a binding contract by April 30, 2010 and settled on the purchase on or before September 30, 2010 may be able to claim up to an $8,000 tax credit. Additionally, a new law also provides a “long-time resident” credit of up to $6,500 for taxpayers who do not qualify as “first-time homebuyers.” To qualify for the $6,500 credit, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence. For qualifying purchases in 2010, you have the option of claiming the credit on either your 2009 or 2010 tax return. Paper returns must be filed to claim these credits and documentation of the purchase must be included with the return. More information is available at IRS
5. Get Credit for Making Your Home More Energy Efficient
Tax incentives are still available for making energy efficient improvements to your home. You may be able to claim a “nonbusiness energy property credit” of 30% of the cost of certain energy-efficient property or improvements you placed in service in 2010. This property can include high-efficiency heat pumps, air conditioners, and water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has been expanded to include certain asphalt roofs and stoves that burn biomass fuel. The total amount of credit you can claim in 2009 and 2010 is $1,500.
6. Get a Tax Break for Education Expenses
The American Opportunity Credit, a modification of the Hope Credit has been expanded for 2009 and 2010 and is available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.
7. Get a Tax Credit for Adopting a Child
The Affordable Care Act raises the maximim adoption credit to $13,170 per child. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. The credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply. Taxpayers can claim the credit by filling out Form 8839, Qualified Adoption Expenses and must include one or more adoption-related documents.
8. Get the Most Out of Your Retirement Accounts
Are you maximizing your contributions to your retirement accounts? This year, you can contribute up to $5,000 in an IRA, as well as another $16,500 to a 401(k) employee plan. If you’re 50 or older, those numbers go up to $6,000 and $22,000, respectively.
9. Get Documentation for Your Cash Contributions to Charities
To deduct any charitable donation of money, a taxpayer must have a bank record or a written communication from the qualifying charity showing the name of the charity and the date and amount of the contribution. A bank record includes canceled checks, bank or credit union statements and credit card statements.
10. Get Information About the Earned Income Tax Credit
Are you wondering if you might benefit from the Earned Income Tax Credit, which is available to low and moderate income workers? Use the EITC Assistant on IRS.gov which helps determine eligibility for the credit. The program will also assist you in determining your correct filing status, determining whether your child meets the tests for a qualifying child, and estimating the amount of credit that you may receive.
Taxpayers who earn less than $48,362 in 2010 may be eligible for a refundable tax credit of up to about $5,680.
11. Get Ready to E-File
E-file is the safe, accurate way for taxpayers to quickly complete their taxes and make certain to take advantage of credits and deductions that may apply. Not only that, but taxpayers can get a refund in as few as 10 days by choosing direct deposit. This option even allows split disbursement where deposits can be made into as many as three separate accounts including checking, savings and other investments.
12. Get genuine IRS info from www.IRS.gov
The one and only official source for IRS information is at IRS Don’t be fooled by scam artists who attempt to create look-alikes.
The IRS does not send out unsolicited email messages. Email messages claiming to be from the IRS are probably phishing scams. Recipients of such emails are urged not to open attachments, click on links, reply with personal information, or complete any other activity that could compromise their computer’s security and lead to identity theft or worse.