Tax Preparation, Part 2: Little Known Facts

“The tax laws are very complex and change over time.”—and most of us know it.
When it comes time to file income tax returns, or many people, it can be difficult to keep track of what deductions they can and cannot take, what credits are available to them, what the best financial advice is—and the list goes on and on. I sat down with Kathy Travis, a Tax and Financial Professional in Greenvale for some tips and tricks to help you get the most out of your 2010 income tax return.
1. First, Travis says, make sure you’re aware of all the credits you’re eligible for. She says that credits are important because they’re a dollar for dollar reduction of your taxes–which means they directly lower the amount you owe.
Some available Federal credits for 2010 taxes include:
-American Opporunities Credit- This credit can be claimed for expenses of up to $2,500 per student for the first four years of post-secondary education and can apply to tuition costs and necessary related expenses, which may include books, supplies and equipment required for the course of study. This credit is 40% refundable—which means you could be eligible to get money back! The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. You cannot take both the credit and a deduction for these expenses. For more information: http://www.irs.gov/pub/irs-pdf/p970.pdf
-Lifetime Learning Credit- Post-secondary education students are eligible to claim up to $2,000 of approved tuition and expenses–with no limit on the amount of years this can be claimed. You cannot claim both this credit and the AOC. For more information: http://www.irs.gov/pub/irs-pdf/p970.pdf
-Consumer Energy Efficiency Credit- This credit is for those making their homes more energy efficient. The credit gives you 30% of the cost up to $1,500 on energy efficient products that were installed in your home by December 31, 2010—and the home must be your existing, primary residence–it cannot be a new home or rental. Eligible products may include: windows/doors, insulation, biomass stoves, roofs, water heaters–and more.
-For people interested in installing geothermal heat pumps, small wind turbines, or solar energy systems–a second version of the credit may be available which can give you up to 30% of the cost with no upper limit—and these improvements can be made on either primary or secondary residences, new or existing. Rentals are not eligible. More information on this credit can be found at:  http://www.energystar.gov/index.cfm?c=tax_credits.tx_index
-Health Coverage Tax Credit-  There are several different health care credit plans that taxpayers can benefit from including some that assist with insurance premium costs and long term health care costs–click here to find out more:http://www.irs.gov/individuals/article/0,,id=187948,00.html
2. Travis says that you should also be aware that just because you don’t qualify to take certain credits federally, doesn’t mean  you aren’t eligible to take them with New York State.
Some credits available for 2010 include:
-NYS College Tuition Tax Credit/Deduction- The college tuition credit is a tax credit allowed for qualified college tuition expenses paid for an eligible student, up to $10,000.
The college tuition itemized deduction is equal to the amount of your qualified college tuition expenses paid, up to a maximum deduction of $10,000 for each eligible student. More information on this can be found at:http://hesc.com/content.nsf/SFC/NYS_College_Tuition_Tax_CreditDeduction
-Long Term Care Insurance Credit: This is for a taxpayer who pays premiums for a qualified LTC Insurance— they mayclaim a credit against their personal income tax which is equal to 20% of their premiums paid during the tax year. To find out more, click here:  http://assembly.state.ny.us/member_files/031/20040524f/
These are just some of the credits that are available–to make sure that you get all of the deductions and credits you deserve, Travis says it’s best to work with a tax professional.   But there are some things you should be aware of, she says— if you’re meeting with an accountant for the first time, or switching to a new one, make sure you bring your past 3 years’ returns. If there are mistakes or deductions that have been missed, they can be amended for the past 3 years. Travis says that in some cases, she’s gotten refunds from $300 to $25,000 to clients!
And again, make sure you are prepared to ask your accountant a lot of questions. They can’t claim deductions they don’t know you have, so if you think you might be eligible for a credit, or even just want to examine the possibility—ask.
You may be pleasantly surprised at what you find.
–Tara Evans

***Helpful links:
IRS    http://www.irs.gov/
NYS Dept of Tax and Finance http://www.tax.ny.gov/
FreeFile Fillable Forms https://www.freefilefillableforms.org/
Highlights of Recent Tax Law Changes http://www.irs.gov/formspubs/article/0,,id=174600,00.html
IRS FAQs http://www.irs.gov/faqs/index.html

Contact your local IRS office http://www.irs.gov/localcontacts/index.html
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: