Tax Deductions and Exemptions-  The tax law provides a standard deduction for those who don’t claim itemized deductions. For 2013 the standard deduction increases to $6,100 ($12,200 for married filing jointly), up from $5,950 ($11,900 for married couples) in 2012.

The personal exemption rose as well, to $3,900 in 2013, up from $3,800 in 2012.  There is a limitation on the itemized deductions and personal exemptions for taxpayers with incomes of $250,000 or more ($300,000 for married couples filing jointly).

The maximum Earned Income Tax Credit is also up: in 2013 a couple filing jointly with three or more children can nab a credit as high as $6,044, up from $5,891 in 2012.

Tax Rates-  As inflation drives wages up, the amount of wages taxed may be less. In tax year 2013, for each of the marginal tax rates - 10, 15, 25, 28, 33 and 35 percent – you will continue to see a reduction in the amount you’re taxed since income limits taxed at lower tax rates were increased.  In 2013 individuals were also given a tax break because Alternative Minimum Tax income limits increased allowing less taxpayers to be subject to this additional tax.  Income above $51,900 ($80,800, for married couples filing jointly) may be subject to the Alternative Minimum Tax, up from $50,600 ($78,750 for married couples filing jointly) in 2013.

There are some changes for high-income taxpayers in 2013. A new tax rate of 39.6 percent has been added for taxpayers whose income exceeds $400,000 ($450,000 if married filing jointly).

Gifts – Gifts you give over a certain amount must be disclosed to the IRS by filing a gift tax return. For years, gifts under $10,000 were exempt, and that’s the amount many people remember. But in actuality the exclusion amount has been going up for a number of years. In 2009 through 2012 it was $13,000, but beginning in 2013 you can gift anyone up to $14,000 a year without filing a gift tax return.

Retirement plans -  If you contribute to a 401(k) or other voluntary salary reduction plan such as a 403(b) or a TSA, in 2013 you’ll be able to contribute up to $17,500 to the plan, up from $17,000 in 2012. If you are 50 or older you can contribute an additional $5,500, for a total contribution of $23,000.

If you are self-employed and have a SEP IRA, for 2013 you can sock away 25% of your gross income, up to $51,000 of retirement contributions. That’s $1000 more than last year.

IRA contributions are also on the rise. You can contribute up to $5,500 a year to your IRA (that was $5,000 last year), plus an extra $1000 if you are at least 50. To contribute the full amount to a Roth IRA, your income  must be $188,000 or less if you are married filing jointly ($127,000 for singles), up from $183,000 in 2012.

Remembering these IRS inflation adjustments will help you plan throughout the year and save at tax time.

Are you expecting a tax refund this year? If you are eligible for the Earned Income Tax Credit, one might be coming your way. Though the refunds are greater if you have children, even those without children can qualify, as long as you or your spouse (if married filing jointly) are between the ages of 25 and 65.

The problem for most people trying to claim the credit is that the rules seem complicated, but using TurboTax makes it simple. In addition to TurboTax software making it easy to claim the credit,  Intuit, maker of TurboTax also has the EITC Finder, which is a free smartphone app that makes determining eligibility easy.

Here are the rules for claiming the tax credit:

Your wages and self-employment earnings are the basis for the credit. You also can have interest, dividends and other investment earnings, but not more than $3,200 in 2012. For most of us, with interest rates at rock bottom, that isn’t a problem.

How much you can earn and qualify for the tax credit may depend on how many dependent children you have.

For 2012 if you have:

• Three or more children, you can earn up to $45,060 and qualify
• Two children, that drops to $41,952
• Only one child, your earnings and adjusted gross income can’t top $36,920
• No children? No problem, as long as your income is less than $13,980.

The refundable tax credit can give you tax credits ranging from a maximum of $5,891 if you have three children, to $475 if you have no children.

Here’s the best part: Most tax credits only apply against taxes you owe. If your tax is zero, you get no benefit. But if the earned income credit is greater than the tax you owe, the IRS will send you the difference. For example, if your credit is $1,200 and you owe $800 in taxes, you’ll get a check from the IRS for $400. How sweet is that?

Now for the fine print: If you are married but file separate returns as “married filing separately” you don’t qualify for the earned income credit. And if you share custody and your child has lived in your household for more than half the year, that child can qualify you for the credit even if the other parent is entitled to claim the exemption for the child on their tax return.

If you are eligible for the federal tax credit and you live in one of the 25 states that also has the credit, your benefits may be multiplied. And even if you normally make too much to qualify for the credit, if you lost your job and were out of work in 2012, you may still qualify for that year.

Remember if you have any questions about this tax law, you can call and ask our CPAs, tax attorneys, or IRS enrolled agents your question for free.

Nosotros como madres y padres trabajamos arduamente para poder darles a nuestros hijos la mejor educación, un techo donde dormir, y un plato que comer todos los días.  Este esfuerzo tan valioso no es  pasado por alto por el Servicio de Impuestos Internos (IRS por sus siglas en inglés).  He aquí algunos créditos que están disponibles al preparar tu planilla de impuestos que nos ayudan con el sustento financiero de nuestros hogares y nuestros hijos.

1.     El Crédito por Ingreso del Trabajo (EITC)

El crédito por el ingreso del trabajo es uno de los créditos que más ayudan a nuestras familias, nuestras comunidades, y sus contribuyentes.  Si trabajaste y ganaste menos de $45,060 dólares en ingresos durante el año podrías reunir los requisitos para recibir un crédito de hasta $5,891 dólares.

De acuerdo al IRS, más de $60 mil millones de dólares fueron otorgados a más de 26 millones de contribuyentes en sus declaraciones del 2011.  Sin embargo, el IRS avisa que muchas personas que podrían calificar no lo reclaman. Si deseas saber si cumples los requisitos para recibir este crédito, puedes usar la aplicación “EITC Finder” disponible gratuitamente en el App Store y en Google Play para tu teléfono inteligente.

2.     Crédito por Gastos del Cuidado de Menores y Dependientes

Otro crédito que puedes reclamar es aquel de gastos relacionados con el cuidado de tus pequeños. Si tienes niños menores de 13 años y pagaste para que alguien los cuidara, podrías calificar. Este crédito está diseñado para ayudarte a recuperar hasta el 35% de estos gastos, hasta $3,000 dólares por un niño y hasta $6,000 por dos o más hijos.

Al igual que el Crédito por Ingreso del Trabajo, uno de los requisitos para poder reclamar este crédito es que hayas trabajado fuera de tu hogar o hayas estado buscando trabajo.  La persona que cuida de tus niños tampoco puede ser alguien que reclames como dependiente (por ejemplo, un hijo mayor o tus padres si los reclamas como dependientes).  Si calificas, TurboTax se hará cargo de hacerte las preguntas necesarias para cerciorarse que recibas la cantidad de crédito que te mereces.

3.     Crédito Tributario por Hijos

Con el Crédito Tributario por Hijos podrías recibir hasta $1,000 dólares por cada niño que califique.  Existen algunos requisitos que tienes que cumplir como edad, tu parentesco con el niño, apoyo económico y su estatus migratorio.

El niño tiene que ser menor de 17 años y dependiente en tus impuestos; que le hayas proporcionado más de la mitad de su apoyo económico durante el 2012; y haber vivido contigo por más de la mitad del año.  También debe ser ciudadano o residente de los Estados Unidos.  El crédito disminuye gradualmente si tienes ingresos anuales de más de $55,000 dólares, o más de $110,000 dólares (si estás  casado/a y declaran como casados).

Estos tres créditos te pueden ayudar a reducir tu carga tributaria o hasta recibir un reembolso de tus impuestos. Podrías usar este reembolso para contribuir hacia el fondo de educación de tus niños, o para poner en marcha tu plan financiero familiar. Cualquiera que sea tu meta financiera, puedes contar con TurboTax para ayudarte a recibir los créditos y los reembolsos que te mereces por tu desempeño familiar.

Joan Ferreira es un experto en finanzas personales que ha trabajado para compañías privadas y organizaciones sin ánimo de lucro ayudando a familias y pequeños negocios alcanzar sus metas financieras.  Aéreas de especialización incluyen impuestos, manejo de deudas, crédito, emprendimiento, e inversiones para el retiro. Él también es el editor principal del blog de finanzas personales, www.blogfinanzas.net, donde se cubre temas de ahorro, frugalidad, manejo de deudas y planificación financiera.  Puedes seguirlo en Twitter por  @blogfinanzas.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is a crucial tax benefit available for low to moderate income earners. It is also very important to those with larger families and relatively low or moderate incomes. Here are the guidelines for this important tax credit.

Income Limits

For the 2012 tax year, your earned income, and your adjusted gross income (AGI, the sum total of all of your earnings less certain deductions) must be less than:

• $45,060 ($50,270 married filing jointly) with three or more qualifying children
• $41,952 ($47,162 married filing jointly) with two qualifying children
• $36,920 ($42,130 married filing jointly) with one qualifying child
• $13,980 ($19,190 married filing jointly) with no qualifying children

If you make more than the relevant amount above, you won’t qualify for the EITC.  Also, if your investment income (like dividends and interest) exceeds $3,200, you’re not eligible for the EITC.

Earned Income Tax Credit Eligibility

In addition to earning less than the dollar amounts in the table above, you must have a valid Social Security Number, work for pay, and your filing status cannot be married filing separately in order to qualify for the EITC. There are other requirements including USA citizenship/resident alien status and limitations on investment and foreign income, but those are typically not issues for people eligible for the EITC.

Work for Pay

Unemployment income doesn’t help you qualify for the Earned Income Tax Credit. Neither does bank interest.  In order to receive any money via the EITC, you must work. You can have a traditional job as an employee or you can be your own boss and earn money from self-employment.  But one way or another, you’ve got to earn some money in order to qualify for the EITC.

Qualifying Children

As you can see above, the relevant income limits are much more generous if you take care of at least one qualifying child.  Your child qualifies if he or she meets all of the following conditions:

• Has a valid Social Security Number
• Is your child (natural, adopted or foster), grandchild, sibling, step-sibling, half-sibling, niece, or nephew
• Younger than you and younger than 19, unless a student (in which case your child must be less than 24), or totally and permanently disabled (in which case there is no age limit)
• Lives with you in the United States for more than half of the year
• The child doesn’t file a joint tax return

TurboTax and the EITC Finder will help determine your eligibility for the Earned Income Tax Credit.

Maximum Credit for 2012

While the precise amount of your credit will largely be determined by your filing status, number of children, and income, there are maximum payable Earned Income Tax Credit amounts. For 2012, these are as follows:

• $5,891 with three or more qualifying children

• $5,236 with two qualifying children
• $3,169 with one qualifying child
• $475 with no qualifying children

What is a Refundable Tax Credit

Note that unlike many other tax credits, the EITC is a refundable tax credit. This means that the EITC can not only eliminate any income tax liability you might have, but if your credit exceeds your tax liability, you can also receive a tax refund for that amount. It is for this reason that the EITC is one of the most important tax considerations.

You will be able to file your 2012 taxes soon so don’t miss out on this valuable tax credit.  It just might mean an extra $2,000 or more in your pocket. Few other tax maneuvers can earn you that kind of cash!  TurboTax ask you the appropriate questions and correctly calculates the Earned Income Tax Credit if you are eligible.

Earned Income Tax Credit

Earned Income Tax Credit Eligibility

To qualify for the EITC, you must have a Social Security Number, work for pay, and earn less than a certain dollar threshold (amounts detailed later).  There are many other requirements including USA citizenship/resident alien status and limitations on investment and foreign income, but those are typically not issues for people otherwise qualified for the EITC.

Work for Pay

Unemployment income doesn’t help you qualify for the EITC. Neither does bank interest.  In order to receive any money via the EITC, you must work. You can have a traditional job as an employee or you can be your own boss and earn money from self-employment.  But one way or another, you’ve got to earn some money in order to qualify for the EITC.

Income Limits

For the 2011 tax year (the tax return you’re about to file), your earned income (what you receive due to your work), and your adjusted gross income (AGI, the sum total of all of your earnings less certain deductions) must be less than:

• $43,998 ($49,078 married filing jointly) with three or more qualifying children

• $40,964 ($46,044 married filing jointly) with two qualifying children
• $36,052 ($41,132 married filing jointly) with one qualifying child
• $13,660 ($18,740 married filing jointly) with no qualifying children

Qualifying Children

As you can see above, the relevant income limits are much more generous if you take care of at least one qualifying child.  Your child qualifies if he or she meets all of the following conditions:

• Has a valid Social Security Number
• Is your child (natural, adopted or foster), grandchild, sibling, step-sibling, half-sibling, niece, or nephew
• Younger than you and younger than 19, unless a student (in which case your child must be less than 24), or totally and permanently disabled (in which case there is no age limit)
• Lives with you in the United States for more than half of the year
• The child doesn’t file a joint tax return.

For more information or to help determine your eligibility for the Earned Income Tax Credit, use EITC Finder app by Intuit.

Claiming the EITC

The EITC Finder  app and TurboTax can help you claim the Earned Income Tax Credit.  Note that unlike many other tax credits, the EITC is a refundable tax credit. This means that the EIC can not only eliminate any income tax liability you might otherwise face but, to the extent your tax credit exceeds your liability, you can pocket the difference. It is for this reason that the EITC is one of the most important tax considerations.

Make sure to review the table above and use the EITC Finder app– if your income is below the relevant threshold, .  It just might mean an extra $2,000 or more in your pocket. Few other tax maneuvers can earn you that kind of cash!

earned income credit app

According to  the IRS, an estimated 20 to 25 percent of qualified workers fail to claim the EITC each year.  Intuit has just launched the free app called the EITC Finder to help determine if you can reap the benefit of one of the most missed tax credits, which may put up to $5,700 in your pocket.

The Earned Income Tax Credit is a tax credit for people who work, but have low wages.  The tax credit not only reduces the amount of tax you owe, but it also may give you a tax refund even if you didn’t pay enough income taxes.

In order to claim EITC, you must meet specific criteria, which is where the new app comes in to simplify the process of helping you determine your EITC eligibility by guiding you through a few simple questions about your marital status, dependents, and wages.

If you are eligible, the app estimates how much will be applied to your federal and state tax refund.   The EITC Finder then tells you how to easily claim your credit by preparing and filing your tax return with one of the free products offered through IRS Free File program, which includes more than a dozen brand-name tax software products donated by private companies, including Intuit’s TurboTax Freedom Edition.

The app, available for iPhone, iPod touch and Android, also provides nonprofit organizations and others that serve lower-income tax filers with an easy and flexible way to help their clients determine EITC eligibility anytime, anywhere with Internet access.

The EITC Finder is now available in both English and Spanish from the App Store, Android Market or Amazon App Store .

More Help if You Need it

Intuit’s Free File product offer , TurboTax Freedom Edition, is specifically targeted to EITC-eligible taxpayers and all filers with an adjusted gross income of $31,000 or less. It is also available to active duty military personnel with an adjusted gross income of $57,000 or less in 2011.

Since 1998, Intuit has donated more than 22 million tax returns to low-and moderate-income taxpayers. In 2010 alone, Intuit donated more than 2.15 million federal and state tax returns via the IRS and state Free File programs.

Find Tax Assistance in Your Community

The Intuit Financial Freedom Foundation works with nonprofit partners across the country to help more taxpayers access its Free File product offering. These include the nation’s network of IRS Volunteer Income Tax Assistance programs, where taxpayers can get help from a volunteer to prepare and file their taxes for free. The Intuit Financial Freedom Foundation is partnering with sites in 11 states and 48 communities to bring TurboTax Freedom Edition to taxpayers this year.

Tax Credits

A deduction is something that reduces your overall taxable income, therefore lowering your tax bill. A credit is different because it reduces your tax liability, dollar for dollar.

To get a better idea of how significant this is, let’s look at an example. If you were able to take a $1,000 deduction that would mean you would reduce your taxable income by $1,000. So if your taxable income was $40,000, after the deduction it would mean your taxable income would become $39,000. At the 25 percent tax rate, that would effectively lower your tax bill by $250.

Now, let’s say you are entitled to a $1,000 tax credit. In this case, you would simply reduce your tax bill by the full $1,000! As you can see, this is why tax credits are the most sought after.

So, what kind of tax credits are available to you come tax time? Well, here are a few common ones that are worth double checking each year to see if you qualify.

Child and Dependent Care Credits

The most common tax credits have to do with children and there are two main credits. First is the child tax credit, which gives you a credit for qualifying children you take care of. The credit is $1,000 per qualifying child, and you must meet income requirements.

In addition to the child tax credit there is also a credit for child care expenses. Depending on your situation there are many qualifiers and limits to what can be claimed, but any time you have children these are credits worth looking into.

Finally, there is an adoption tax credit as well. This credit is meant to help ease the financial burden of going through the adoption process. This credit can be as high as $13,360 per child.

Elderly and Disabled Credit

Once you reach age 65, or if you are on permanent disability, there are a few tax credits available. Unfortunately, these credits have very low income limits, so they aren’t available to many.

Energy Credits

Going green has its benefits beyond just helping the environment. There are tax credits available on anything from buying Energy Star appliances to a hybrid vehicle. These credits vary greatly depending on what you buy, but you can typically get up to a 10 percent credit of the purchase price on qualifying energy efficient appliances and home improvements, up to a maximum of $500. That’s not too bad if you need to replace an old appliance anyway.

Earned Income Tax Credit

Another popular tax credit for lower income filers is the earned income tax credit, or EITC. If you have earned income that falls below certain limits (based on how you file and family size) you may be entitled to this credit. Families with children really benefit from this credit and may receive a credit anywhere from a few thousand to over five thousand dollars.

Saver’s Credit

Here is a tax credit that often gets overlooked. The saver’s credit helps low to moderate-income filers to save for retirement. This credit is worth up to $1,000 ($2,000 for married filing jointly) for those contributing to a qualifying retirement plan such as a 401k or IRA. As if the credit isn’t enough, keep in mind that contributions made to some retirement plans also count as tax deductions, so you’re basically double-dipping in the tax savings. It makes saving for retirement a no-brainer.

Make Sure You Get Your Credits

As you can see, there are a number of tax credits available, and these are just the most common ones. Some of these can be easy to overlook, and if you aren’t careful you could be leaving money on the table. Using your trusted TurboTax software, you can be sure you’re getting every tax deduction or credit you deserve.

Interactive by joshritchie

Embed the above image on your site using the code below:<a href="<a href="http://intuitturbotax.files.wordpress.com/2011/12/turbotax-child-tax-benefits.png"><img" rel="nofollow" target="_blank">http://intuitturbotax.files.wordpress.com/2011/12/turbotax-child-tax-benefits.png"><img</a> src="<a href="http://intuitturbotax.files.wordpress.com/2011/12/turbotax-child-tax-benefits.png&quot" rel="nofollow" target="_blank">http://intuitturbotax.files.wordpress.com/2011/12/turbotax-child-tax-benefits.png&quot</a>; alt="child tax credit" title="child tax credit" width="620" height="2845" class="alignnone size-full wp-image-8428" /></a><br/>Free Tax Filing, Efile Taxes, Income Tax Returns - <a href="<a href="http://www.turbotax.com">TurboTax.com</a&gt" rel="nofollow" target="_blank">http://www.turbotax.com">TurboTax.com</a&gt</a>;

Most unclaimed tax refunds belong to people who did not make much money during the year, and therefore are not required to file a tax return. That’s right, the IRS actually tells you that if you make below a certain amount each year, you don’t have to file a return. But that’s usually a mistake. Just because you don’t have to doesn’t mean you shouldn’t. Even though you didn’t make a lot of money you still probably had taxes deducted from your paychecks. With various tax credits and deductions, you could certainly get some of that back, but you have to file a return in order to be eligible for the refund.

The other big reason that tax refunds go unclaimed has to do with tax credits. There are a number of tax credits out there, but the biggest, most overlooked tax credits are the refundable Earned Income Tax Credit (EITC) and various economic stimulus credits that have been issued in recent years. Sometimes filers do their tax return and submit it on time, but miss out on these tax credits. It is up to you to claim them. It isn’t something the government will catch and gladly send you a check for.  Want to see if you’re eligible for the Earned Income Tax Credit?  Try the TurboTax EITC Calculator.  The calculator is updated every tax season due to tax law changes, but you can still get an idea if you are eligible for the Earned Income Tax Credit even if you are estimating a prior year.

So, how do you determine if you are owed money and how can you go about requesting it? First, in order to collect a refund, a tax return must be filed with the IRS no later than three years from the due date of the return. After that, the money gets absorbed by the treasury, so you should stay on top of it. There is no penalty for filing a late return if you qualify for a refund.  You will also need to have your tax documents, namely your W-2s. If it has been a while, it may mean contacting your employer and getting new copies. Once you have the supporting documentation, you can go ahead and complete those past tax returns.

There is a catch. You have to be caught up on your taxes in the years following the year you’re requesting the refund. For example, if you’re trying to get money back from your 2009 tax return, you will have to make sure you’re squared away with 2010 first.

If you think you may be one of the millions of tax filers who could have some money waiting for you at the IRS, now is the time to start thinking about going after it. If you made money in the past few years but didn’t make enough to be required to file, it’s a no-brainer.  You should think about getting those past returns filed. If you already filed your previous tax returns, it would be a good idea to dust them off and look through them to make sure you took advantage of the EITC (if you qualified), the Making Work Pay Credit, and any others. Sure, it may only be a few hundred dollars, but why not get your hands on it if you’re entitled to it?  TurboTax will guide you through tax deductions and credits so that you don’t miss out on any of your refund.

Earned income tax credit (EITC)

The IRS estimates that nearly 6 million taxpayers who are eligible for the Earned Income Tax Credit (EITC) fail to claim it.  That’s one in five! And the reason we’re not claiming this credit — a credit designed to supplement wages for low-to-moderate income workers (which is a lot of people these days, including many individuals and families who were previously classified as “middle class”) – is generally due to one of two reasons: a) the rules pertaining to this credit are confusing, and b) taxpayers are not aware that they qualify! What’s it worth? The maximum credit for 2010 is $5,666 for those with three or more dependent children; smaller credit amounts are available for those with fewer – or no – qualifying children. While the exact refund you receive depends on your income, marital status, and family size, consider this: qualifying taxpayers who claimed the EITC last year got an extra $2,200 on average.

Job-hunting costs

With 15 million Americans out of work, you might very well be one of them. But if you looked for a position in the same line of work in 2010, and if you itemize your return (!), you can deduct job-hunting costs — from cab fares to food, travel and transportation expenses to/from interviews, to business cards, career counseling, the costs of preparing and copying your resume and more — as miscellaneous expenses.  A few caveats: expenses incurred by those seeking first-time employment are not deductible (Sorry, recent grads!), and in order to get this break, the amount of all miscellaneous itemized tax deductions must exceed 2% of your adjusted gross income. That may sound like a lot, but you’d be surprised how easy it is to clear this threshold–particularly if you didn’t make much last year.  Furthermore, you get this break even if the job search was unsuccessful.

Out of pocket charitable contributions

While you surely remember any big charitable cash donations you made in 2010, you may easily forget the smaller, non-cash contributions. No, you can’t deduct your time, but you can deduct various out of pocket costs you incurred while doing good deeds–things like ingredients for pies you made for your favorite charity, materials you used to make blankets for a homeless shelter, stamps you bought for a fundraising event, and miles.  You can claim 14 cents a mile for any driving you do in service of a charity or volunteer project.

State sales tax deduction

When you have the option of claiming either state and local income taxes OR state and local sales taxes, the income tax deduction is typically a better deal. However, this write-off makes the most sense for those who in states that do not impose an income tax. How much can you deduct? Use the IRS’ tables as a guideline or prepare your taxes with software, it will do all the hard work for you!

Child-care tax credit

The child-care tax credit is easy to miss, particularly if you working parents pay your child-care bills (such as daycare or nanny services) through a tax-favored reimbursement account at work. While only $5,000 in expenses can be paid through one of these accounts, up to $6,000 (for the care of two or more children, under the age of 13) can qualify for the credit. What if you hit the cap at work and spend another $300? $500? $700? So long as these expenses are for work-related child care, up to an $1000 of additional costs can be claimed. How much it this credit worth? While that depends on your income, the number of children, and the cost of care, the credit starts at 35% of qualifying expenses if your adjusted gross income is less than $15,000 and phases out to 20% of eligible expenses if your adjusted gross income is more than $43,000.

Tax deadline: April 18th!

Did you know that you have few extra days to file your federal taxes this year? That’s right – you have until April 18th to get everything in order and filed (to avoid conflicts with Emancipation Day).  Just remember: this is both the deadline to file, and the deadline to pay. If you owe the government money, even if you file an extension, you must pay your best estimate–within 90% accuracy–of what you think you owe or you’ll be hit with interest and penalties on any balance due.

Unemployment benefits ARE taxable

There’s some confusion here, particularly since in the 2009 tax season, an exemption was given for the first $2,400 in unemployment benefits. Sorry, but that break has expired for tax year 2010. Unemployment benefits are considered taxable income and must be reported on your federal tax return.

You may be eligible for the EITC

Maybe you weren’t eligible for the Earned Income Tax Credit last year or even the previous year, but you may be eligible this year as you may have seen your income take a bit of a hit.  And you’re not alone.  Many individuals and families, previously classified as “middle class,” are now eligible for this tax break which are designed to supplement wages for low to middle-income workers. To determine whether you qualify, use the EITC Assistant, an interactive tool that’s available on IRS.gov.  All you have to do is answer a few simple questions to find out if you qualify and if you do, this credit could be worth a whopping $5666 this year.

Consider weather-related tax breaks

It’s been a brutal winter! And while homeowners insurance can protect your home and possessions during damaging weather, what you might not realize is that you may be able to deduct storm damages — providing the damage meets the definition of a casualty loss.  What’s that? A casualty loss is something that happens suddenly and unexpectedly (like a roof collapsing due to heavy snow) as opposed to something that happens gradually (such as water seepage in a basement).

Claim the Making Work Pay credit

If you were eligible for this tax credit, the government simply took less money from your paycheck (a single taxpayer was eligible for up to $400 last year; married couples, up to $800), but that’s not the official credit claim.  To account for this money, you need to do a little extra work and file Schedule M.

To be eligible for the EITC, taxpayers need to meet the follow criteria:

• Must have valid Social Security Numbers;
• Must be U.S. citizen or resident alien for the entire year;
• Cannot use the married filing separately filing status;
• You and your spouse (if married) cannot be claimed as a qualifying child by someone else.
• Cannot claim the foreign earned income exclusion (which relates to wages earned while living abroad)
• You and your spouse (if married) are between the ages of 25 and 64.
• An easy way to see if you qualify to claim the EITC is to use our Earned Income Tax online calculator.

If you qualify for the EITC, you need to file a tax return to claim your credit. Intuit is working with nonprofit groups and public and private sector partners to help low and middle-income taxpayers get access to free online tax preparation so they claim this and other tax credits and deductions.

Through the IRS Free File program, Intuit provides free online tax preparation and electronic filing for individuals who qualify for the EITC. The program is also available to active duty military with an adjusted gross income of $58,000 or less, or who have an adjusted gross income of $31,000 or less.  Since 1998, Intuit has donated more than 22 million returns to these low- and moderate- income taxpayers.

Additionally, at tax assistance events around the country, eligible tax filers can accurately and easily prepare their returns for free with TurboTax, ensuring they claim all the deductions and credits they deserve. These include:

IRS Volunteer Income Tax Assistance Programs – IRS VITA sites in 12 communities across the country will offer filers the option of using TurboTax to prepare their returns on their own with the assistance of an onsite coach.

New York City Department of Consumer Affairs, Office of Financial Empowerment – Taxpayers can prepare and file their federal, state and city returns online with TurboTax at 20 free tax assistance sites throughout New York City. The program is part of a campaign designed to increase awareness about EITC.

Community events – Intuit is participating in a series of more than 30 tax assistance events across the country through April. Taxpayers can prepare and file their taxes through the IRS Free Program and with 21 state Free File programs.

Last year, California taxpayers alone left more than $1 billion in EITC funds unclaimed. There’s simply no reason to leave money you’re owed on the table. Find out if you qualify and file your return to claim your EITC.

When taxpayers don’t take advantage of EITC, everyone suffers. And I mean everyone. When these dollars don’t reach the pockets of hardworking families, the money fails to make it into the revenue stream of our communities, our states and our country. That stifles small business sales and job creation and potentially limits individual economic security and opportunity.

How EITC Works

This video (link) explains what EITC is, who qualifies and why it’s important. Or, from the New America Foundation: An individual must have earned income, be a U.S. citizen or legal resident and have a valid social security number. For tax year 2009, a qualified claimant may have investment income of less than $3,100 and a maximum annual earned income of varying levels based on the number of qualifying children. Confused, don’t be; watch the video!

The federal EITC benefit for the 2009 tax year ranges from $5,657 for families with three children to $457 for individuals or couples without children.

Sounds easy enough. Yet sadly, new research by the New America Foundation shows that in California alone, as many as 800,000 eligible Californians alone are not claiming EITC and leaving more than $1.2 billion dollars on the table. That’s a lot of money!

What you can do

There are two ways to break down the barriers and help yourself and other hard working people get the money they deserve.

• Check out WEb Connector (it’s free!). Intuit and the Intuit Financial Freedom Foundation have partnered with California First Lady Maria Shriver’s WE Connect campaign to connect citizens to numerous money-saving programs and help them take advantage of unclaimed state and federal dollars. As part of the partnership, Intuit created and donated the WEb Connector, a free online tool in English and Spanish. Modeled after Intuit’s own TurboTax technology, WEb Connector easily guides people through a few questions and helps them learn if they might be eligible for federal and state programs (like EITC) that can put more money in their pockets, and how to apply for these programs.
• Attend an upcoming event in California. Encourage your co-workers, friends and family to learn more about EITC and other money-saving programs. Attend a WE Connect Weekend in Fresno (March 19 – 21) or Los Angeles (March 26 – 28) that bring together local, state and federal public and private resources all in one place.

Together, we can make a difference, put money in the pockets of those who need it the most, and boost our economy.

AGI

Your Adjusted Gross Income is key to figuring out your taxes, but computing it can be tricky. Thankfully, TurboTax takes care of the legwork for you. The AGI includes your income, minus certain deductions such as alimony, interest for student loans and contributions to a retirement account.

AMT

The Alternative Minimum Tax was originally designed to tax the 150 most wealthy Americans back in 1969. But because the AMT was never indexed for inflation, millions of people pay it today. A temporary patch for 2009 returns sets the AMT exemption at $46,700 for single filers and $70,950 for joint filers.

Here’s how I describe the AMT: It’s a bizarre parallel tax universe in which you lose most of your valuable tax deductions, including the standard deduction along with state and local taxes. Overall, some 4 million taxpayers are expected to pay $35.5 billion in AMT in 2009, at an average of about $8,400 each, according to the Tax Policy Center.

It’s pretty hard to avoid the AMT, if you stuck in this tax trap—I know this firsthand. We’ve been paying the AMT for nearly a decade.

EIN

If you work in corporate America, your employer has a nine-digit Employer Identification Number. And this number is key to making online tax filing easy. With this number you can import your employment tax information directly into TurboTax.

EITC

The Earned Income Tax Credit is designed to give the lower-paid workers—I like to refer to them as the worker bees—a chance to lower their taxes or claim a refund. To get the credit, your income cannot exceed $13,440 if you are single and have no children. (The income threshold is $18,440 if you are married and filing with your spouse). If you fit the bill, you are eligible for a $457 credit.

Those little (or not-so-little) bundles of joy living in your home make this tax credit even more valuable. Depending on the number of children you have, the credit increases from $3,043 (one child) to $5,657 (three kids or more), But you cannot earn more than $43,279 if you are single and $48,279 if married and filing jointly with three or more qualifying kids.

Overall, the EITC was responsible for helping Americans realize $49 billion in tax credits in 2008.

FSA

A Flexible Spending Arrangement lets you save pretax money for qualified health-care services every year. They are typically a use-or-lose proposition, though, so it is important to set a careful estimate of your health-related expenses. If you end up with a lot of money left in your FSA at the end of the year, consider donating medical supplies to a local school or clinic.

HSA

As the cost of health insurance continues to climb, more employees are opting for Health Savings Accounts. These high-deductible health plans (HDHP) let employees make contributions to a savings account with pretax dollars. While your employer may or may not contribute to the account, any money you do not use can continue to grow, similar to a retirement savings plan.

For the 2009 tax year, HSA holders can deduct up to $5,950 if the account is for family coverage. And if you are 55 or older, you can add another $1,000.

IRA

An Individual Retirement Arrangement is one of the best—and simplest—ways to save for retirement, especially if you don’t have an employer-sponsored retirement savings plan. Since your savings are tax-deferred, IRAs also help reduce your overall taxable income. If you discover that you have a big tax bill, you may be able to open a traditional IRA for the corresponding tax year to minimize your financial burden. But, like everything related to taxes, there are bells and whistles.

If you are under age 50, the maximum amount you can stash in a traditional IRA for 2009 is $5,000. If you are older than 50, the contribution cap rises to $6,000. But you also have to meet certain income restrictions to get the tax benefit of an IRA. For example, if you are married filing jointly, your modified adjusted gross income must be $89,000 or less to get the maximum deduction.

IRAs come in several distinct flavors: while traditional IRAs help cut your tax bill now, it makes sense for some folks to use Roth IRAs which require you to pay your taxes upfront. In 2010, the once-restrictive rules for Roth eligibility are shifting in a big way. Here’s a rundown of the changes.

MSA

A Medical savings account is mainly used by self-employed folks or employees of small businesses along with their spouses and dependents. They are similar in scope to HSAs–you can accumulate savings for medical expenses tax-free. The money you save is portable if you change employers.

MFJ

Married couples have the option to file their taxes together or separately, but most save thousands of dollars by filing jointly (married filing jointly). That’s because filing separately disqualifies you from some of the most significant tax credits and deductions which include the EITC (above) along with valuable childcare and dependent care deductions.

MFS

While it usually makes sense for married couples to file their taxes together, there are a few exceptions to this rule-of-thumb. You’ll want to use the married filing separate tax status if your spouse is in trouble with the Feds and hasn’t paid taxes in a while. (I actually know a couple who encountered this problem. NOT good.) Married couples should also consider filing separate returns if one of you has a huge tax bill and the other could get a refund. Here’s some more information about marriage and taxes from TurboTax.

SIMPLE

In addition to traditional IRAs and Roth IRAs, there is also the Savings Incentive Match Plan for Employees. SIMPLE IRA plans are a favorite retirement savings vehicle for small businesses (100 employees or less) because they are actually fairly easy to set up. Employees and employers can make contributions to traditional IRAs, although there are limitations.

OIC

The financial crisis has left a lot of taxpayers with big bills and little financing options. An Offer in Compromise is an agreement between a taxpayer and the IRS to settle a taxpayer’s tax debt for less than the full amount owed. But the reduced equity taxpayers have in their real estate holdings may complicate the deal.

To decode more taxcronyms, check out this handy, dandy IRS tip sheet.

As you know, if you’re serving in a combat zone, your military pay might not be taxable and therefore you might not have to file a tax return.  However, you could still be eligible for the Earned Income Tax Credit.

What’s an earned income credit?

It’s a credit on your federal tax return that’s available to taxpayers who don’t earn a high income. It’s available for single folks with income under $13,440.  For families, it depends on the number of children.  A family with 3 children with income under $48,729 could be eligible for at least a partial credit.  For many military members, their wages fall into the earned income eligibility.

What’s a tax credit?

A credit reduces your taxes dollar for dollar, and part of this credit is available as a refund even if you have no tax.

How does nontaxable combat pay work?

For any month that you’re stationed in a combat zone as an enlisted member, warrant officer or commissioned warrant officer of the military, your earnings for that month are not taxable. For officers, the amount of their income not taxed is capped at the highest enlisted pay. If you have questions about the definition of a combat zone, check out IRS – Military Pay Exclusion – Combat Zone.

Can I still get that tax credit without my pay being taxed?

Yes. There’s a special law just for the military, that allows you to elect (choose) to have your combat pay (that’s not taxable) be considered “earned income” for earned income tax credit calculation only.

Should I elect that?

Probably. However you need to check if your refund increases with that election.  If your spouse has wages or self-employment income, adding your combat pay may reduce or cancel the credit. Once your family income is greater than $16,000 to $21,000, the credit starts to decrease. So be sure to check which choice gets you more money.

If you use TurboTax to prepare your return, we ask about that election when your W-2 shows that you have nontaxable combat pay (box 12, code Q).   If you say yes, be sure to verify that the refund in the refund monitor increased. If your refund is reduced, just go back and change the election to no.

For more information on the military and taxes:

IRS Questions & Answers on Combat Zone Tax Provisions

IRS Tax Information for Members of the Armed Forces

IRS Armed Forces Tax  Guide

I’m in the military. Do I need to file a state return?

Military Spouse Residency Relief Act and State Taxes

Between the dismal economy and just business as usual, the year 2009 was filled with major life changes for many people. Now, as we approach Valentine’s Day, many more can expect another major life change in the near future–marriage.  An estimated 2.2 million Americans get married each year, and approximately 10% of those marriage proposals happen on Valentine’s Day.

Valentine’s Day also happens to fall during tax season–and it’s important to know that most of life’s big milestones, such as having a baby or buying a home, come with lovely (forgive the pun!) implications. Here are some timely tax tips to plan for these life-altering events which may have occurred in 2009:

You Got Hitched in 2009

Americans are waiting longer to get married. The median age for a man and woman’s first marriage was 27.6 and 25.9 years, respectively, in 2008. (In 1960, men typically got hitched at age 22.8 while women were 20.3.) There are plenty of social implications for delaying marriage, but waiting longer to tie the knot means that you may be more established in your financial life, too. And that can make filing your taxes more complicated. Yet while all married couples can file their taxes together or separately, most save thousands of dollars by filing jointly. That’s because filing separately disqualifies you for some of the most significant tax credits and deductions which include:

• The Earned Income Credit

The Earned Income Credit is responsible for more than $49 billion in tax credits, so you don’t want to miss out. Congress originally approved the tax credit legislation in 1975 as a way to offset Social Security taxes and to provide an incentive for workers. For 2009, you’ll need an AGI (adjusted gross income) of $70,950 if married filing jointly to qualify.

• Child and Dependent Care deductions

The typical American family with two young children spends an average of $14,000 a year on child care, which is almost a quarter of its annual income, according to the U.S. Census bureau. The good news is that some of those childcare costs are tax-deductible; the bad news is that figuring out if you qualify can be extremely tricky. (We have a full-time caregiver for our son, so I know firsthand that you will need to jump though several hoops to get these deductions.) And that’s why TurboTax is an excellent resource for sorting out the complex paperwork to get you what you are owed.

• American Opportunity and Lifetime Learning credits

For 2009, there are several tax credits available to help you offset the costs of higher education by reducing the amount of your income tax, depending on your income. The Lifetime Learning Credit can be used for qualified education expenses for you, your spouse or your offspring while the American Opportunity Credit can be claimed for tuition and certain fees you pay for higher education in 2009 and 2010. For the tax year, you may be able to claim a Lifetime Learning Credit of up to $2,000 (and the credit is $4,000 if you are a student in a Midwestern disaster area). The American Opportunity Credit is worth up to $2,500 for qualified tuition and expenses.

• Student loan interest deduction

The interest you pay on your student loans may also be tax-deductible.For 2009, the tax deduction is phased out if your filing status is married filing jointly and your modified adjusted gross income is between $120,000 and $150,000. Keep in mind that you aren’t eligible for this deduction if your modified AGI is $150,000 or more.

You Had a Baby in 2009

If your bundle of joy lives with you and does not provide more than half of his or her own support, you can claim that kid as your dependent. Additionally, there are other credits your child may qualify for:

• Child Tax Credit

This credit, which can be as much as $1,000 per eligible child, is in addition to the regular $3,500 exemption claimed for each dependent.

• Earned Income Credit

The Earned Income Credit is pretty hefty. You get a credit of $5,657 with three or more qualifying children; $5,028 with two qualifying children; and $3,043 with one qualifying child.

You Bought A Home in 2009

If you’re the primary borrower on your home loan and you make the loan payments, you qualify for a mortgage interest deduction. All you need to take the deduction is your mortgage statements. Other key deductions include property taxes, private mortgage insurance payments, purchase points, home improvements for medical reasons and mortgage interest on a second home.

If you are a first-time homebuyer, you are in luck, too. Thanks the stimulus plan, the maximum credit amount is $8,000 for a first-time homebuyer –– which is a buyer who has not owned a primary residence during the three years up to the date of purchase. There’s also a long-time resident credit of up to $6,500 to others who do not qualify. Keep in mind those buyers 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.

Remember that you can’t e-file if you take this credit.  You need to paper file and provide documentation.

You Changed Jobs in 2009

Getting a raise, starting a new job, or retiring from an old one can also have a dramatic impact on your taxes. Here are few final tax-saving tips:

• Keep receipts for job hunting and work-related moving expenses. They are deductible!

• When you rollover your 401(k), have it directly deposited into your new account.

• If you’ll owe taxes on your Social Security benefits, request voluntary withholding to minimize the tax bite.

• To find out if your tax will rate will change with a new salary, compare your last year’s tax bracket to this year’s. Your tax bracket is the rate at which your last dollar of income is taxed. It’s higher than your actual tax rate. But it will give you a good idea of how much of your income will go to Uncle Sam.

As you spend Valentine’s Day with your significant other, make sure you raise a glass of champagne to celebrate love and its many tax benefits!

Undeniably, though, children are expensive. Parents and guardians have to provide food, clothing, education, health, shelter, time, love, and care to raise a thriving child, and those things can really eat into your pocketbook.

Thankfully, the tax laws offer quite a bit of help to parents by making the burden of taxation easier on them. Here are five key things to remember if you’re a parent.

1. Standard Deduction Each child in your family is another dependent on your tax form, which means a $3,750 deduction if you’re filing using standard deductions (which many people do, particularly those who do not own homes). If you have two children, like I do, this can easily save you $1,000 on your tax bill, if not more.

2. Child Tax Credit You can earn a tax credit of up to $1,000 per child if your total household income is $110,000 or below. See IRS Publication 972 for full details on this benefit.

3. Child and Dependent Care Credit You can earn a tax credit of up to 35% of your child care expenses. If you have child care for your children, this is a must. See IRS Publication 503 and Form 2441 for the full scoop.

4. Education Credit If you have a student enrolled in an eligible educational institution (most colleges qualify), you can get the Hope Education Credit, which is worth up to $1,800. Check out IRS Form 8863 for more information.

5. Earned Income Tax Credit If you have children, it’s much easier to qualify for the Earned Income Tax Credit, which is a powerful benefit for people with a low income. You can use the IRS EITC Wizard to find out if you qualify for this credit.

Having a child may be expensive, but that child can do wonders when it comes to tax time.

TurboTax Blog Team Note: Check out the TurboTax Cutest Last-Minute Tax Deduction Contest for a chance to win $5,000.