Tax Tips

Seen those credit card advertisements telling you to pay your taxes via credit card and earn free airline mileage. What the credit card companies fail to tell you (or tell you in fine print in the back of the message) is that the they charge the same fees they charge merchants (often between 2% and 2.5%) which are not covered by the IRS. Thus, you pay them.

Unless your mileage points are worth more than 2-2.5% of the amount you charge, this only makes sense for the credit card companies.

Fraudulent Email

The Internal Revenue Service has issued several recent consumer warnings on the fraudulent use of the IRS name or logo by scamsters trying to gain access to consumers’ financial information in order to steal their identity and assets. When identity theft takes place over the Internet, it is called phishing.

The IRS periodically alerts taxpayers to, and maintains a list of, phishing schemes using the IRS name, logo or Web site clone. If you've received an e-mail, phone call or fax claiming to come from the IRS that seemed a little suspicious, you just may find it on this list.

Finally, if you get a phone call, fax or letter from someone who claims to be an IRS employee, you can verify it by calling 1-800-829-1040 to see if there's a reason the IRS would be contacting you and whether there is such an employee. As for a phishing e-mail, forward it to phishing@irs.gov, then delete it from your compute

Refund Anticipation Loans

Loans Secured by Tax Refunds Additional Resources Debt Consolidator Debt Consolidation Mortgage Debt Consolidation Loans Car Title Loans Rent-to-Own Tax Refund Loans Payday Loans Also known as state and federal refund anticipation checks, refund anticipation loans (RAL), and instant refund loans, these short-term loans are meant to offer consumers fast access to their tax refund dollars. Instead of waiting weeks to receive their full refund from the IRS, these offerings provide customers with the convenience of receiving their money in the near-term, minus the associated fees and interest charges.

The problem with these loans is the high fees charged. Many taxpayers would be better off adjusting their withholding or estimates to avoid refunds. A refund is just a loan to the government at 0% interest. Adding fees on top of this is costly.

Energy Credits

Federal tax credits for energy-efficient home products were extended through Dec. 31, 2011. Bit the credits aren’t as high as those for 2010.

The 2011 Energy Tax Credit drops to 10 percent of a project — excluding installation — and $500 max. (Last year’s credit was 30 percent of a project and up to $1,500.) If you’ve already taken advantage of the Energy Tax Credit, whatever you claimed in the past counts against the $500 in 2011. Here are some of the caps.

Windows and skylights: up to $200.

Air conditioner: up to $300.

Furnace (efficiency must be 95 percent, up from 90 percent from before the extension. Includes natural gas, propane, oil or hot water): up to $150.

Water heater (includes electric, natural gas, propane or oil): up to $300.

Insulation, doors and roof: up to $500.

For more information, go to www.energystar.gov/taxcredits....more

Child Care Credits

This credit is for people who have a qualifying child as more than one person. For details, see the instructions for
defined on this page. It is in addition to the credit for child Form 1040, lines 51 and 6c, or Form 1040A, lines 33 and
and dependent care expenses (on Form 1040, line 48; 6c. Form 1040A, line 29; or Form 1040NR, line 46) and the
earned income credit (on Form 1040, line 64a; or Form Limits on the Credit 1040A, line 41a).

The maximum amount you can claim for the credit is You must reduce your child tax credit if either (1) or (2)
$1,000 for each qualifying child.oes here, and here and here and here!

A qualifying child for purposes of the child tax credit is a child who: (1) Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or
nephew); (2) Was under age 17 at the end of 2010, (3) Did not provide over half of his or her own support for
2010; (4) Lived with you for more than half of 2010 (see Exceptions to time lived with you below); (5) Is claimed as a dependent on your return, and (6) Was a U.S. citizen, a U.S. national, or a U.S. resident alien.

For more information see IRS Publication 519,
...more

Education Tax Credits

As the cost of obtaining a higher education continues to rise, there are tax credits that can help ease the financial burden. There are two tax credits for higher education.

The American Opportunity credit provides a refundable tax credit of up to $2,500 for undergraduate education. The American Opportunity Credit is scheduled to expire at the end of 2012. The Lifetime Learning Credit provides a tax credit of up to $2,000 for any level of college education (even graduate school), and doesn't require a minimum level of enrollment. However, the Lifetime Learning Credit has a narrower income range compared to the tuition deduction.For 2010, Congress enabled a greater degree of qualification of certain education-related expenses as valid or expanded tax deductions within the 2010 tax year under the American Opportunity Credit legislation.

Here’s what you need to know about the American Opportunity Credit:

The first qualification centers on income. Full credit is possible for those whose gross adjusted income is $80,000 or less for individual filers or $160,000 for married couples filing a join return. Credit is tiered and reduced as income rises above that benchmark. Under the American Recovery and Reinvestment Act, benefits from the Hope Act and the Lifetime Learning Credits are expanded, but there are still income-related restrictions. Qualifying income levels are raised above those determined by them, as well.

Only tuition and certain related expenses qualify under the American Opportunity tax credit.
The Hope Act allowed tax credit for only the first two years of learning at an accredited school. The American Opportunity credit allows for the first four years of learning at secondary schools. Expenses related to programs extending beyond four years, whether regarding a post-graduate degree or an expanded bachelor’s degree program, do not qualify for this tax credit.

Here's what you need to know about the Lifetime Learning Credit:

The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit of 20% of tuition expenses, with a maximum of $2,000 in tax credits on the first $10,000 of college tuition expenses. You can claim the Lifetime Learning Credit on your tax return if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses. Unlike the American Opportunity credit, you need not be in the first four years of undergraduate classes. Even if you took only one class, you may take advantage of the Lifetime Learning Credit.

Education credits is a complex subject. Contact your financial advisor or your accountant for more information and personal guidance.

Retirement Savings Credit

If you make a contribution to a retirement account -- such as an IRA or a 401(k) -- you could be eligible for up to $1,000 in credit if you're single, and up to $2,000 for married couples.To qualify, single filers must make less than $27,750 and married couples, under $55,500.

If you're going to claim this credit, you must be over 18, not a full-time student and cannot be claimed as a dependent by anyone else. The actual credit is based on your filing status, how much you contribute to your retirement account and how much you make. The more you contribute, the less you earn and the higher your credit will be.

To claim this credit, you must complete Form 8880 – also known as the Credit for Qualified Retirement Savings Contributions. To get the form, and instructions for calculating how large your credit will be, visit www.irs.gov