Only two weeks and a day until tax time! If you had a rough 2009, however, there may be a silver lining. If your income went down last year, you might qualify for more deductions and credits than you did in 2008. And even if you didn’t lose your job, there’s a lot you can do to help save yourself some cash:
Consider doing it yourself (with computer assistance). When you use a program like TurboTax, H&R Block at Home, or TaxAct, the program does the calculations for you and you get your refund faster than you do with paper filing. Costs start at about $30 for the simplest returns, and they’re almost always cheaper than seeing an accountant. That said, an accountant’s expertise can save you a lot of money if your taxes are complicated, and you can deduct the cost of the preparation fee. You can opt for a store-front chain like H&R Block, or find an Enrolled Agent (licensed by the IRS) at NAEA.org.
Cut down on the costs of preparation. Don’t discount getting some guidance even if you think you can’t afford it. If your adjusted gross income was $57,000 or less in 2009, the IRS offers free tax-prep software. Go to irs.gov and search for “free file.” And if you make less than $49,000, you may also be eligible for Volunteer Income Tax Assistance, in which volunteers will walk you through your returns for free. Call 800-906-9887 to find the nearest location. You can also contact the AARP (888-AAR-PNOW or www.aarp.org) for information about a similar program for older taxpayers.
Beware refund anticipation loans offered by store-front tax preparers. They make it seem as if you’re simply getting your refund quicker than you would from the IRS. Instead, you’re getting an expensive loan that carries very high fees: The effective APR on some of those loans – which only gets you a refund a week or two earlier than the IRS would – can be as high as 500%.
Don’t assume the EZ form is best. Do you have a child, or did you buy a car or a house, put money into a retirement account, or spend money on a job search last year? There’s a good chance you’re eligible for a credit or a deduction if so, and you can’t claim that money if you use the IRS’s shortest form, the 1040EZ. (The 1040A offers a little more wiggle room with credits but doesn’t allow you to itemize.) Investigate your possible deductions, and if you can take more than the “standard deduction,” which is the set amount the IRS offers every tax-payer as a starting point, then you should itemize by filling out the full 1040. This year, that number is $5,700 for single people, and $11,400 for married couples filing jointly.
Know what you’re owed. Notable credits and deductions include the Saver’s Credit (up to $1,000 for taxpayers who made less than $27,750 and contributed to a retirement account), the first-time homebuyer credit (up to $8,000 for people who bought a new home in 2009), and the deduction you can take on any interest you paid on student loans (up to a $2,500 deduction). You can also deduct job-hunting expenses, home-office costs if you were self-employed, and moving expenses if you moved to be closer to a job (with some restrictions). For the first time, the first $2,400 of unemployment benefits you received last year is tax-free. And if you open up a traditional IRA before April 15, you can still deduct your contribution from your 2009 taxes. Check out a tax guide like "J.K. Lasser's Your Income Tax 2010
" (make sure it says 2010 on the cover!) for a full rundown of the credits and deductions you might be eligible for. And IRS.gov is a good place to start, too.
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IN 2009, DID YOU…
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IF SO, YOU MIGHT BE ELIBIGLE FOR:
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Open a traditional IRA?
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Up to a $5,000 credit. You have until April 15, 2010 to open an account.
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Purchase your first home?
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Up to an $8,000 credit.
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Pay interest on a student loan?
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A deduction of up to $2,500.
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Pay for higher education?
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A credit up to $2,500 per student.
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Purchase a new vehicle?
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A deduction on the sales tax.
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Have a child under age 17?
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A credit of $1,000 per child.
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Pay for child care?
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A credit between $600 and $2,100.
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Save money in a retirement account?
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Up to a $1,000 credit for taxpayers with incomes lower than $27,750 ($55,000 for married couples)
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The credits and deductions above are all subject to various income limits, ranging from $27,750 to $260,000. Talk to your accountant or check IRS.gov for a full list and details.
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Comments [2]
RE, Asking the salesperson about credits for items purchased.
Double check the credits the salesperson says will apply.
I have had clients tell me that items qualified that did not.
For example some appliance sales people have told their customer that any 'energy star' item qualified for the Residential Energy Credit.
Can I deduct my husbands funeral expense ? I live in MA. I was reimbursed from my husbands "estate". But, the estate money was my husbands money to begin with - IRA money and 6,000.00 gain on some stock only. The money in the estate went to his children and grandchildren after expenses (attorney, accountant, funeral). None to me. Can I claim it on our joint return ?
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