When preparing your taxes there are a lot of simple and easy errors you can avoid with a little double checking and extra diligence. Also, one of the biggest reasons a tax refund is delayed is because of an error. Before you file your taxes, check out this list of common errors and correct them before you file:

1. Incorrect or Illegible Social Security Numbers

Double-check your Social Security numbers before you file. You need to make sure that you have the right numbers for you and your spouse, as well as for any dependents that you claim. Your EITC and other dependent related tax benefits could be at risk if you have the wrong Social Security number for your child.

Also, make sure your tax return is legible. Rather than filling out the forms by hand – making it easy to mistake the number 8 for the number 3 in your Social Security number, use tax prep software.

2. Forgetting Dependents

Don’t forget to claim dependents. In many cases, college students can be claimed by you. Also, if you have been caring for an aging parent, you can often claim him or her as a dependent. Think about those to whom you have been providing material support, and don’t forget to claim them as dependents.

Just make sure that no one else is claiming them as well. Each dependent can only be claimed on one tax return. So you need to work out claims with siblings if it’s your aging parent, or with your ex if you are divorced.

3. Overlooking Tax Deductions

Go through your expenses from the past year, and make sure you aren’t overlooking deductions. You might be surprised at what you can deduct, from job hunt expenses to moving expenses, if you meet the right criteria. Don’t pay more than you have to.

4. Not Taking Advantage of E-file

E-filing is a great way to file your tax return quickly (don’t miss the deadline!) as well as get your tax refund processed quicker. Plus, there is a reduced chance of mistakes on the IRS end if you E-file.

If you are entitled to a tax refund, you can get it much faster when you E-file. E-file combined with direct deposit is the fastest way to get your tax refund.  The IRS estimates that 9 out of 10 tax refunds will be processed within 21 days.

Points – You may know that points you pay on a mortgage to buy a home are deductible. On a refinance, however, the points are taken over the life of the loan. What’s often missed on a subsequent refinance, you should then take the remaining dollar value of points from the prior refinance.

Rent – Can’t be deducted on your Federal Tax Return, but a number of states allow for a partial deduction.

State Sales Tax – This deduction has been available for only a few years, and is most welcome to those who live in a state with no income tax. The IRS allows you to choose between an amount based on income, or actual sales tax paid, which can be substantial if you’ve made some high ticket purchases.

Charitable Donations – Did you know that if you volunteer for a charity that, in addition to cash or goods donationated, you can deduct 14 cents per mile that you drive to help the charity out. For those who support a food bank with weekly visits, for example, this deduction can add up over the year. Be sure to keep notes for the dates you volunteered and the miles driven each day.

Are you a Teacher? Keep your receipts if you’ve purchased any supplies for your classroom. You can deduct up to $250 even for those who don’t itemize.

Medical Expenses- Tax deductions to the extent they exceed 7.5% of your Adjusted Gross Income (AGI). Some items that are easily missed: mileage – a deduction of 23 cents per mile for medical purposes. For those who have frequent visit to the doctor or clinic, this can add up. Equipment for disabled individuals, including items such as crutches, walkers, and orthopedic shoes. Any changes you make to your home to accommodate an elderly or disabled person is deductible less any value such renovation adds to the house.

Energy Saving Home Improvements – a number of improvements made in 2012 count toward the Residential Energy credit. Included are such items as energy efficient windows, doors, and roof. Also on the list is insulation, and new heating or central air conditioning. We’ll discuss this in greater detail in an upcoming article, so you’ll be an expert on this topic.

Credit for Retirement Savings Contribution – Couples filing jointly with an AGI up to $57,500, or Singles up to $28,750 can receive a credit up to $1,000 per person if they make a contribution to an IRA account during the year. The amount varies based on income, and the credit itself can be as high as 50%, a great motivation for lower income earners to find spare cash to fund their IRA.

TurboTax will ask you the necessary questions so that you get these tax deductions and credits if you’re eligible.  If you have questions, remember only TurboTax allows you to speak to tax experts who are CPAs, IRS enrolled agents, and tax attorneys.

Dependency exemption. In 2012, you can claim a personal exemption deduction of $3,800 for each child and other dependent, and for 2013 that increases to $3,900. Those exemptions reduce the portion of your income that is subject to federal tax. If you are in the 15% bracket this will save you $570 for 2012, and at 25%, $950 in 2012. The higher your tax bracket, the more each dependency exemption saves you.

Child Tax Credit. You may also be eligible for a tax credit, which is even better than a deduction, since it reduces your taxes dollar for dollar. The Child Tax Credit is an additional $1,000 credit you may be able to claim for children under 17. For married couples with income over $110,000 or $75,000 for a single parent, the credit phases out.

Child and Dependent Care Credit.  Child care is expensive, but Uncle Sam can help you out with the cost. If you are working or actively seeking work and you pay child care for your dependent who is under age 13, you can claim the Child and Dependent Care Credit.

This credit is a dollar for dollar reduction of your taxes, based on your child care expenses up to 35% of $3,000 for one child or $6,000 for two or more children. The credit ranges from 20 to 35 percent of your child-care expenses, depending on your income.  Nursery school, private kindergarten, after school programs and day care are all qualifying expenses.

Earned Income Tax Credit. There’s a special credit available if your wages and self-employment income fall below a certain level. How much you can earn and qualify for the credit depends 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. With just two children, that drops to $41,952. Only one child, your earnings and adjusted gross income can’t top $36,920. The refundable tax credit you can receive ranges from a maximum of $5,891 if you have three children, to $475 if you have no children. Unlike other tax credits, the earned income credit is refundable, so if the credit is greater than the tax you owe, the IRS will send you the difference.

So next time the kids are driving you crazy, remember the tax savings and give them a big hug instead.

Don’t forget that TurboTax will help you get all of the tax credits and deductions you’re eligible for so you keep all of your hard-earned money.

What’s Better – A Tax Credit or Deduction?

First off, many families filing are a bit confused over what exactly tax deduction and credits are. While they can both help you with your tax obligation, there are differences.

Tax deductions lower your income that is eligible to be taxed. This helps you as it may lower your tax bracket. Tax credits, on the other hand, actually reduces your taxes owed, dollar for dollar.

There are two types of credits: non-refundable and refundable. A non-refundable tax credit will decrease your income tax owed and possibly eliminate it. You do not get a refund from it if your credit is more than your income tax owed. With the refundable tax credit, as the name implies, not only can you reduce or eliminate your income taxes, if it totals more than you owe, then you get a tax refund for the difference.

Tax Deductions for Families

If you’re looking at reducing how much of your income is taxed, here are some deductions you may want to check out to see if you qualify for them.

• Exemptions for Dependents: If you have dependent, such as a child, then you can claim an exemption worth $3,800 with your taxes. You must provide a social security number for the dependent.
• IRA Deductions: If you’ve contributed to your traditional IRA in 2012, you may receive a deduction, up to $5,000.
• Charitable contributions: Many of us keep receipts for charitable donations, but did you also include the supplies you purchased to help a non-profit organization?
• Personal property taxes: You may have received a state and local tax bill during the year for your personal property like a recreational vehicle. While it’s a chunk of change out of your budget, the good news is that state and local property taxes related to personal property is tax deductible.

Tax Credit for Families

While there are many tax credits available, the most common that affect families are Earned Income Credit, Child Tax Credit, and Child and Dependent Care Credit. I’ll briefly discuss the benefits of each, so you can get an idea of whether they apply to your family’s situation or not.

• Earned Income Credit: Depending on your income and your family size, you may be able to take advantage of this big tax credit. For example for 2012 taxes, the maximum credit for a family with 3 or more qualifying children is $5,891.
• Child Tax Credit: For parents meeting the income requirements ( currently for couples whose MAGI is under $110,000 or $75,000 for a single parent), this credit can be worth $1,000 for each qualifying child you claim on your taxes.
• Child and Dependent Care Credit: If you paid for child care for your dependents (under 13) while you worked or went to school, you may use this credit to claim up to 35% of expenses up to $3,000 for one qualifying dependent or $6,000 for two or more dependents.
• Adoption Credit: Those households who expanded family through adoption can use the adoption credit worth up to $12,650.

Thoughts on Tax Deductions and Credits for Your Family

By using all of the tax deductions and credits that you’re family is eligible for, you can minimize your tax obligations and perhaps increase your refund. I’d love to hear from you about which tax credits and deductions your family have used.

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As parents, we work hard to provide our children with the best education, a roof to sleep under and food to eat every day. This valiant effort is not overlooked by the Internal Revenue Service (IRS). Here are some tax credits that are available when you prepare your tax return, that help you with the financial support of your home and children.

1.  Earned Income Tax Credit (EITC)

The earned income tax credit is one of the most helpful for our families, our communities and taxpayers. If you worked and had an annual income of less than $45,060, you may be eligible for a credit of up to $5,891 dollars.

According to IRS, more than $60 billion was granted to more than 26 million taxpayers for their 2011 returns. However, the IRS confirms that many people who qualify do not actually claim it. To learn if you are eligible to receive this credit, you can use the “EITC Finder” App available for free from the App Store and Google Play for your smartphone.

2.  Child and Dependent Care Credit

Another credit you can claim is for the expenses associated with the care of your little ones. If you have children under age of 13 and you pay someone else to take care of them,  you could qualify. This credit is designed to help recover up to 35% of  dependent care costs up to $3,000 for one child and $6,000 for two or more.

Just like the Earned Income Tax Credit, one of the requirements to claim this credit is that you were working outside of your home or were looking for work. The person who takes care of your children cannot be someone that you claim as dependent (for example, an older child or your dependent parents).  If you qualify, TurboTax will take care of asking you the necessary questions as you prepare your tax returns, to ensure you receive the credit amount that you deserve.

3.  Child Tax Credit

With the child tax credit you could receive up to $1,000 for each qualifying child. There are some requirements that you need to meet, such as their age, your relationship to the child, financial support and his or her immigration status.

The child must be under the age of 17 and a dependent on your taxes; receive more than half of his or her financial support from you; and have lived with you for more than half the year. The child must also be a citizen or resident of the United States. The credit is gradually decreased if you have an annual income of more than $55,000 (or $110,000, if married and filing jointly).

These three credits will help to reduce your tax burden or even grant you a tax refund, which could be allocated towards  your children’s education, or to start your family’s financial plan. Whatever your financial goal may be, you can count on TurboTax to help you get the credits and refunds that you deserve for the investment you have made in your family.

Yet, in the middle of such happiness, someone (usually an uncle you only see twice a year) always seems to tell you how expensive a child will be in the 18 years that you’ll be responsible for them.

Medical Expenses

Depending on where and how you decided to have your child (hospital, birthing center, home care birthing specialists) you probably got popped with a pretty large medical expense to bring your little bundle of joy into this world.

Although paying medical bills isn’t too much fun, the good news is that you can deduct those expenses (as itemized deductions) on that year’s taxes, saving you quite a bundle.

I don’t know if it’s common practice, but my wife and I were still receiving bills from nurses and anesthesiologists when our baby was seven months old. This serves as a reminder to keep excellent records and store all of your receipts and documents in a safe place.

Your Child is Dependent on You

A new baby is totally dependent on his or her parents, but they also give mom and dad quite a nice tax break. The word on the street is that claiming a dependent (newborn or not) on your 2012 tax return will net you a $3,800 deduction. That’s $100 more than 2011 and you can claim this exemption no matter what time of year your child was born.

Your Child’s Gift to You

Not only do parents get to reap the benefits of a new dependent on their tax returns, but they also get another small gift from their little bundle of joy – the Child Tax Credit.

This year, the child tax credit remains the same at $1,000 per child. Here’s how a tax deduction and credit differ:

• a deduction reduces the overall amount of your taxable income
• while a tax credit reduces your tax bill by the actual dollar amount

This means that a $1000 Child Tax Credit reduces your tax bill by $1,000.

The Gift that Keeps on Giving – Your W4

Tax breaks on tax day are great, but don’t forget about your monthly take home pay.

When you have a child, this new person in your life also changes how you fill out your W-4 at work. Because claiming a dependent changes your tax bill, this means you may be able to now cut back a little bit on your tax withholding at your job.

Simply put, a new baby at home can upgrade your take-home pay. All you have to do is request to file an updated W-4 with your employer.

It might also be important to note that, if you’re a single parent, a new child might enable you to change your filing status from “single” to “head of household”. This simple change will increase your standard deduction.

Credit for Adoption

There are many people each year that adopt their new precious little bundle. And thanks to Uncle Sam, this scenario also comes with plenty of tax help.

In 2012, the Adoption Credit is worth $12,650 to help offset the cost of adopting a child. And for parents who adopt a child with “special needs” the IRS allows them to claim the full amount of the credit, even if the actual adoption costs were less.

No matter how you look at it, bringing a new child into your home and raising them to adulthood will cost quite a bit, but using TurboTax will help you apply all of the tax deductions, credits, and tax breaks that the government allows.

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.

Elle Martinez Couple Money

Before this year ends, make sure you take some time to get yourself and your taxes squared away. Not only can you lower your tax obligations, but you may also be able to get a bigger refund.

My end of year tax tip is to make sure you get all your tax deductible expenses organized and done before January comes. If you are self-employed there are some helpful tax deductions (like the home office deduction ) that you can qualify for, but sometimes get skipped because you can’t find receipts.  Review your business upcoming needs such as office supplies and equipment, then take advantage of the sales going on right now. Whether your self-employed or not, putting in a bit of effort now can be a huge money saver for you.

JoeTaxpayer Financial Commentary for the Average Joe

Most readers are aware that you are able to deposit to your IRA or Roth IRA up until Tax Day, which will be April 15^th, 2013.

On the other hand, the ability to convert to a Roth IRA ends on December 31^st. Are you convinced tax rates are heading up? Will a marriage in next few years send you into the next tax bracket? Are you retired and find your Required Minimum Distributions are rising faster than you’d like?

If any of these situations apply, a Roth conversion might be a good idea. The process is simple, one form to fill out to tell your bank or broker exactly how much to convert from your Traditional IRA to a Roth account.

Michael Rubin CPA, CFP Total Candor

This is my favorite end-of-year tax tip because it does more than save you on your taxes.  When you increase your 401(k), 403(b), or similar qualified workplace retirement plan, you immediately save taxes.  Most other year-end tax tips require that you wait until you file your tax return before you can actually realize the benefit of your strategy.  However, when you increase your retirement contribution, your tax withholdings decline in the very next paycheck. That’s a pretty immediate payback.  In addition to immediate savings, you also save money for your future at the same time.

If your employer matches your contribution and you haven’t already maximized the value of the 2012 match, remember that your match is a use it or lose it phenomenon. As a result, an increased year-end 401(k) contribution allows you to claim more or all of that free money you’d otherwise forfeit forever.

Phil Taylor, CPA PT Money

My favorite end of year tax tip has to be contributing more money to your 401K or Traditional IRA. This move has two major benefits:

1. If the contribution qualifies as tax deductible, you’ll save significant money on your taxes; and

2. You’re saving more money towards your retirement. We all need more cash when we retire. Before making this move, make sure you’re aware of the annual income and contribution limitations so that you’re on good terms with the IRS.

Ginita Wall, CPA, CFP® Plan for Wealth

Tax-deductible IRAs. What could be better than a tax-deductible IRA? A Roth IRA. It isn’t tax deductible, but the money you withdraw at retirement will be tax-free. With a regular IRA you’ll have to pay income tax on all withdrawals. For most people, the Roth IRA will produce superior results over the long run.

Jeremy Vohwinkle Generation X Finance

One of my favorite last minute year-end tax tips is to make January’s mortgage payment in December. This is virtually painless if your typical mortgage payment comes out on the first, or at least early in the month because you’re simply paying a bill you’d otherwise be paying a few days early and getting credit for the interest deduction in the current year. Just keep in mind that in order for this to work you need to pay your regular January mortgage payment and make it clear you’re not making an additional December payment. Additional payments typically apply only to principal, and while that will help you pay off your loan sooner, it won’t provide the added mortgage interest deduction you’re looking for.

Jim Wang Bargaineering

If you do any investing at all you probably have some gains and some losses. If you have unrealized losses, consider taking advantage of tax laws that allow you to offset your winners with losers. To figure out taxes on your investment gains and losses, you take your gains and subtract your losses. You owe taxes on the net profit.

The wash sale rule is in place to establish what losses you can claim. If you own a stock, or mutual fund, and you sell it to offset some of your gains, you aren’t allowed to purchase that security, or a “substantially identical” security, again within 30 days. You also aren’t allowed to purchase shares within 30 days ahead of a sale, with the thought that you’re selling the other “losing” shares.

Election

We all know that donations to charities are deductible. But if you contributed to a candidate or political party or a PAC (Political Action Committee), is your contribution deductible? In a word, NO. Political contributions aren’t deductible even if you are running for office and spending money on your own political race.

You’ll find the official word from the IRS in IRS Publication 529 [Miscellaneous Deductions]: “You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible.”

There aren’t many ways to get around these rules. Lobbying expenses you incur trying to influence legislation or political campaigns aren’t deductible. Costs of mailers that you pay directly don’t pass muster. Fundraising dinners and events don’t qualify for tax deduction. And contributions to organizations whose primary purpose is influencing legislation won’t be deductible either.

About the only way to fund a political campaign with funds on which you haven’t paid taxes is to check the box on your tax return that asks if you want to donate $3 to the Presidential Election Campaign Fund. The funds raised are distributed to the two parties and their two presidential candidates during the months leading up to each presidential election. If you decide to make this donation it won’t affect your tax liability or refund.
If you truly want to use your time and influence to make a difference, here’s my best advice: VOTE!

Don’t let your tax extension cost you more. Take a look at some of the most commonly missed tax deductions by extension filers.

‘Out of Pocket’ or ‘Noncash’ Charitable Contributions

Even if you’re in a rush, it’s hard to forget about those larger monetary charitable contributions. They usually leave a pretty obvious paper trail.

But what about those smaller contributions made with your pocket change, your gas money, or by donating goods and services to local charities and non-profit organizations? When you’re already past the April tax deadline and you’re in a rush to file your taxes, it’s easier to forget to take the time to add up all of the small stuff.

Many extension filers admit to caring more about filing before October vs. making sure they get every single deduction. Don’t forget, adding up the small stuff can make a huge impact.

State Sales Tax

The State Sales Tax deduction is a tax deduction that gives you the opportunity to choose between deducting state and local income taxes on large purchases or state income taxes.

If you live in a state with zero income tax (South Dakota, Washington, Alaska, Texas, Nevada, Florida, and Wyoming) then this is your chance to deduct state and local sales tax since you won’t have any state income taxes to deduct. Unless Congress votes to extend this tax provision, then 2011 is the last time you will be able to take advantage of this tax savings.

Student Loan Interest

If you made student loan payments on qualified student loans, the interest portion up to $2,500 is tax deductible.

You can even deduct your student loan interest if your parents are making your payments as long as they are not claiming you as a dependent. According to the IRS, the payments may be looked at as a financial gift from your parents.

Earned Income Tax Credit

Figures from the IRS show that more than 25% of eligible tax filers forget to claim the Earned Income Tax Credit. Many people aren’t aware that they qualify.

On average, households which claimed the EITC last year saved an additional $2,000. When you sit down to file your taxes don’t forget to claim the Earned Income Tax Credit.

Don’t worry about missing these valuable tax deductions and credits.  TurboTax will help you take advantage of these and other tax deductions.

Who Should Take Education Tax Benefits

Is the Student a Dependent?

First of all, you need to determine if the student is a dependent. If a parent claims his or her student as a dependent, then that’s who gets to take the tax credit or education deduction. Whether it’s the American Opportunity Tax Credit, Lifetime Learning Credit, or the Tuition and Fees Deduction, only one person gets the tax advantage and it often comes down to whether the student is a dependent in the eyes of the IRS. If a student is a dependent on someone else’s tax return, the student doesn’t qualify for these tax breaks.

If a student isn’t claimed as a dependent, though, it’s possible for him or her to claim an education tax credit, or take the deduction.  One thing to keep in mind, each student cannot claim more than one tax break. So it’s one of the education credits or education deduction (not all of them).

Should the Student Take the Tax Credit or Deduction?

In some cases, it makes sense for the student to take the tax break. If the student is married, and no longer dependent on a parent for support, obviously that’s who should take the education tax break. Additionally, if the student makes enough money to owe taxes, it makes sense to reduce that tax bill as much as possible.

Most of the time, though, students don’t earn enough money to owe taxes. As a result, in many cases, it makes more sense for parents to claim their children as dependents and reap the benefits of the tax breaks. After all, parents have spent quite a lot to raise their children, and probably help pay for college. It’s only reasonable that they receive some sort of financial benefit in return – and a lower tax bill is one way to recoup a few of those costs.

Once you have made your decision about who will claim the education tax benefit, TurboTax will figure out which education tax credit or deduction you are eligible for when you prepare your taxes.

Education Expenses

If you are looking for a way to offset some of your education costs, the government offers some tax credits and deductions designed to help students and their parents. While these tax breaks won’t completely cover the cost college, they can reduce some of the pain involved.

American Opportunity Tax Credit

The American Opportunity Tax Credit is offered to students who pay qualified tuition (and aren’t claimed as dependents elsewhere), as well as to parents who pay expenses for their dependent students or themselves. Replacing the Hope Credit, the American Opportunity Credit offers some modified rules, which make it available to more students. Normally, the Hope Credit only allowed you to use it on the first two years of post-secondary education, and the modification allows for up to four years, as well as raising the income limits, and expanding qualified expenses.

The popular American Opportunity Credit was set to expire at the end of 2010. However, it has been extended through the end of 2012. This tax credit allows you to claim up to $2,500 per student. The full credit is available for individuals with a MAGI(Modified Adjusted Gross Income) of $80,000 or less, $160,000 for married filing jointly. It is 40% refundable, meaning that you can get up to $1,000 back even if you don’t owe taxes.

Lifetime Learning Credit

Rather than limiting your ability to get tax credits for education expenses for the first four years of college, it’s possible to use the Lifetime Learning Credit to offset your expenses even in graduate or professional school. As long as the educational institution is qualified, undergraduate or beyond, you can qualify for up to $2,000 in tax credits for your expenses. It’s figured on 20% of your tuition and fees, up to the first $10,000. There is a phase out as you reach certain income levels. Parents can claim this for dependent students.

Deduction for Tuition and Fees

Unlike the credits, which are dollar for dollar reductions in how much tax you owe, deductions reduce your income. You still receive a benefit; it just isn’t as pronounced. You can take a deduction for up to $4,000 spent on college tuition, and on related expenses.

Limitations to These Tax Breaks

Realize that there are limitations to the tax breaks you can take. If you claim the Tuition and Fees Deduction, you can’t take any of the credits. Additionally, you can’t claim the American Opportunity and Lifetime Learning credits for the same student in the same year. If you are a parent with multiple dependent students, you can spread these credits around a little bit to maximize your return.

Carefully consider your tax situation as you decide what is best. Remember that a credit is far more valuable than a deduction. For example, a $2,000 tax credit means a direct $2,000 reduction in tax liability. A deduction reduces your taxable income, so assuming you are in the 25% tax bracket, you would need a $8,000 deduction to get the same reduction in liability as a $2,000 tax credit.

Finally, don’t worry about figuring out which education credit or deduction to take.  TurboTax easily chooses the best option for you depending on your eligibility.

Education Credits and Deductions

• American Opportunity Tax Credit – (A modification to the Hope Credit) This tax credit is for up to $2500 per eligible student. It is available for couples filing joint with income up to $180,000 or $90,000 if single. 40% of the credit may be refundable, this means that if this tax credit is greater than your total tax for the year, you may get a check from the IRS for up to $1000 in addition to the tax you already paid.

Other requirements for this education tax credit include the fact that the student must be enrolled at least half time for at least one academic period during the tax year, and as of the end of 2011, the student must not have any felony drug convictions. Last, note that qualified expenses include not only tuition, but any enrollment fees, and required course material.

• Lifetime Learning Credit – The rules for this credit are a bit different from the American Opportunity Tax Credit. The credit is worth $2000 per return (not per student) and there is no limit to number of years it may be taken, so long as it’s in effect. The credit may be taken for couples with income up to $122,000 or single filers with income up to $61,000. All years of post secondary school qualify for the credit as do any courses to acquire or improve one’s job skills.

The student doesn’t need to be registered for any number of classes, even just one class qualifies for the credit. Besides the tuition, fees, and books, both “supplies and equipment” also qualify. Felony drug conviction is not a disqualifier for this credit. Last, the credit in not refundable. It can only offset your tax bill, not refund in excess of what you paid.

• The Student Loan Interest Deduction – for some time, personal interest (credit cards, car loans, etc) has not been deductible, but student loan interest might be. For those with modified adjusted gross income (MAGI) of $150,000 or less for joint filers, $75,000 if single, interest up to $2500 per year may be taken as a deduction. This is a deduction directly against your income, not subject to the need to exceed the standard deduction to get on schedule A. The interest deduction is available until the student loan is paid off, or until canceled by congress.

• Tuition and Fees Deduction – This deduction is against income, skipping the Schedule A, and helping to reduce your taxable income if this benefits you more than either the American Opportunity Tax Credit or the Lifetime Learning Credit. The deduction is available for Joint filers whose MAGI is less than $160,000, $80,000 if single. The eligible expenses include Tuition and fees, but specifically exclude room and board.

No discussion of tax savings for college should ignore the savings accounts targeted for college expenses. Let’s take a look at the two popular ones.

• Coverdell Education Savings Account – When first introduced, this account was called the “Education IRA” which was a bit of a misnomer as the account has nothing to do with retirement. On the other hand, it bears a striking resemblance to the Roth IRA. The deposits to the Coverdell are not tax deductible, but grow and are withdrawn tax free if used for the beneficiary’s qualified education expenses. The deposit limit is $2000 per year, and there is a limit of MAGI of $220,000, $110,000 if single to make the deposit. Any funds not used for qualified expenses must be withdrawn by the time the beneficiary turns 30. Distributions that don’t qualify for college expenses are subject to tax as well as a 10% penalty. This account may be combined with the credits and deductions above, but not for the same exact expenses.

• Qualified Tuition Program – Commonly known as the 529 plan, this account has no income restrictions at all for deposits. The account deposit limit is currently $300,000 which is well over the amount that would be needed for any 4 year degree. Practically speaking, it’s common to limit deposits to the $13,000 gift limit ($26,000 if both parents deposit.)

One is also permitted to gift ahead up to five years with no gift tax due and not tapping into the unified lifetime gift tax amount. Withdrawals for qualified expenses are withdrawn tax free, but as with the Coverdell, tax and penalty apply if withdrawn with no qualifying expense.

One choice is to take the remaining balance and change the beneficiary for the account. Any close family member up to first cousin is eligible for the transfer. For those who are trying to get money out of their estate, this opens up the possibility to move significant sums of money out of their name to set up 529 accounts for their extended family.

There is no age restriction, so no rush to transfer funds. You can wait until your new graduate has children of her own and make them the new beneficiaries to educate the next generation. This account may be combined with the credits and deductions above (including the Coverdell), but not for the same exact expenses.

Taxes for Beginners

A New Job and Your W4

If you’re a beginner at filing your own taxes, chances are high that you’ve started a new job, possibly your first in the “real world”. Congrats! But with adulthood and a full-time job comes the reality that a significant part of your pay won’t get to see the inside of your bank.

When you start a new job, your employer will have you fill out a W4, which is the Employee’s Withholding Allowance Certificate. This document basically wants to know your marital status and how many tax-withholding allowances you intend to claim.

Filling out your W4 correctly will go a long way in easing the pain of your first tax season.

A Large Refund Isn’t Always a Good Thing

Yes, a giant chunk of money is great. Who wouldn’t love the massive refund check, like the one’s you hear about on commercials this time of year? But if you receive large tax refunds year after year, you might want to rethink your money management.

Basically, a tax refund means that you paid the government too much money over the course of the last year. It’s like giving Uncle Sam an interest-free loan. So when you get your refund, the government is giving you back your money. If you make the right adjustments on your W4 in the previous year, you could keep more of your own money and put it to work for you throughout the year.

Filing the Easy 1040EZ Form

If you’re just starting out in life, it’s a good bet that you will qualify for the IRS 1040EZ Form. The major criteria for this form are that you haven’t made any money from investments, you make $100,00 or less per year, you don’t claim any dependents, and you didn’t earn more than $1,500 in interest.

Not only is this form simple to fill out, but if you qualify by meeting the required criteria, the 1040EZ is free at TurboTax.com and TurboTax will easily guide you through you entries. Sure, you could spend $70 by using a tax professional to file your taxes. But if you qualify for the 1040EZ form, your situation probably isn’t complicated enough to justify the money spent.

Standard Deduction vs. Itemized Deduction

As a beginner to filing taxes, it’s important to understand the difference between the standard tax deduction and itemizing your deductions. Any deduction will reduce your amount of taxable income, but choosing the right path will save you the most money.

The standard deduction is just what it sounds like – it’s standard. It’s a set amount of money and just about everyone will qualify for it. For the 2011 tax year, the standard deduction amount for a single person is $5,800, married filing jointly is $11,600, and married filing separately is $5,800 each. You’ll want to use the standard deduction if your itemized expenses do not exceed these amounts.

Itemized deductions are expenses made on certain goods and services (such as medical expenses, mortgage interest paid, giving to charity, and job-related costs) that the government has declared as tax deductible. If all of your qualified itemized expenses add up to an amount greater than the standard deduction amount, then you should use the itemized deduction because that will reduce your taxable income by a greater amount.

One of the easiest ways to find out which deduction you should take is by using your tax software. Most tax software, including TurboTax, will walk you through all of your potential itemized deductions, calculate the totals, and show you which deduction will benefit you the most.

Don’t Wait Until the Last Minute

The final piece of advice to give a tax newbie is to make certain that you file on time. Don’t worry about an extension, don’t wait until the last minute, and don’t let tax fear and intimidation force you to ignore the inevitable. Taxes are due on April 17th this year.

Forget about your history of procrastination, your late night college cram sessions the night before finals, and your constant inability to be on time. Today is a new day! It’s time to plan ahead, prepare in advance, gather all of your tax information as soon as it’s available, and knock this tax stuff out of the park.

Good luck and happy tax season.

TurboTax e-file

Not only that, TurboTax now offers free, one-on-one tax advice from highly qualified CPAs, IRS Enrolled Agents, and tax attorneys!  So, not only can you take control over your own taxes, pay less to file your taxes than with tax stores, but you can also feel confident that a highly qualified tax professional is there to assist you if you need help.  Oh and did I mention?  There is no e-file fee!  It is also free!

You may be wondering:

How can TurboTax offer e-filing early if the IRS is not accepting tax returns yet?

TurboTax will securely transmit your tax information electronically to the IRS as soon as they begin accepting tax returns on January 17th!  You may benefit from an early tax refund, because as soon as the IRS starts accepting tax returns and sends you confirmation that they accepted your return, per the IRS, you may receive your tax refund in as little as 7 days from IRS acceptance if you request direct deposit.  If your tax return is rejected after it is electronically transmitted to the IRS, no need to worry.  The IRS will send you notification and you can fix your online tax return and resubmit it.

The IRS supports TurboTax and prefers that you e-file your tax return.  TurboTax protects your personal information using bank-level data security which includes encryption.  TurboTax online stores your information on a firewall-protected server, which can only be accessed using your user name and password.

How do I file my tax returns if I did not receive my W-2 or 1099s yet?

Don’t worry!  Did you know that TurboTax works with 400,000 employers, banks, and financial institutions so that you can safely, securely, and accurately transfer your important financial information directly from the financial institution to your tax return using TurboTax online.

What are the benefits of E-filing and using TurboTax early?

• Quick Tax Refund – Per the IRS, taxpayers who e-file their tax returns with direct deposit will receive their tax refund in 7 to 15 days from IRS acceptance of the tax return as opposed to 6 to 8 weeks for paper filers.
• More Accurate Tax Returns -  According to the IRS, 20% of paper filed tax returns have mistakes as opposed to a low 1% error rate for electronically filed returns.  TurboTax easily guides you to enter all of your relevant tax information so that your tax return is accurate.
• Free Tax Advice – If you file your tax return early with TurboTax online, not only do you get free e-file, you also have the opportunity to get free one-on-one tax advice from highly qualified CPAs,  IRS Enrolled Agents, and tax attorneys.
• Bigger Tax Refunds – Preparing your tax return using TurboTax will get you the tax deductions and credits you deserve.  TurboTax guides you through tax deductions and credits you may miss if you file your tax return via a paper and pencil.  TurboTax software is developed in compliance with IRS tax guidelines so your taxes are done right.
• Filing at the Last Minute May Lead to Mistakes – Completing your taxes at 11:59 pm on  4/17/2012 may cause you to rush and make mistakes.

What if I didn’t make very much money?

• Even if you think you didn’t make enough money to file, you may be entitled to a refund, due to taxes deducted from your paycheck and various overlooked refundable tax credits and deductions you are entitled to.  Most unclaimed refunds, belong to people who did not make much money and thought they were not required to file taxes.

Start the New Year off right and get your taxes done early!  You’ll feel at ease and have fatter pockets!

Some of the tax-savvy moves to maximize your 2011 tax refund shared by Bob Meighan, CPA include maximizing:

• Deductions and Credits
• Retirement Accounts
• Donations to Charity
• And More

Check out the end of year tax tips here!

Bob Meighan is a CPA and Vice President of  Customer Advocacy for TurboTax.  Bob joined TurboTax in 1991.  Prior to that, he spent 11 years with the “Big 6 (Now the Big 4)” accounting firm, Price Waterhouse.  Bob Meighan has also been featured on ABC News, CNBC, CNN, Fox Business, Bloomberg Radio, and countless television and radio programs.  He also contributes tax tips to the Wall Street Journal, NY Times, Associated Press, and USA Today.

Keep in mind, your driving costs include vehicle depreciation, maintenance, and insurance as well. Remember that if your actual documented costs exceed these rates, you can take your actual expenses instead. You must use the standard rate the first year you put the car in service, but may change methods in subsequent years. If you are leasing a car, you must use the same method each year that you chose in the first year of the lease. Do the math and choose wisely. Following are the rates, in cents per mile, which you are allowed to deduct for the end purpose listed.

What’s the impact of this change? The EPA offers an estimate of 12,000 miles driven per year, but it’s safe to assume those who are driving for business purposes are not average. So, if we assume a 20,000 mile per year driver, this increase in rates will provide an extra $450 in deductions, and $112 back in the pocket of the 25% bracket filer.

To take this write-off the IRS expects you to keep contemporaneous (“real time”) records, a log of daily miles driven justifying the proper use. The easiest way to have this disallowed in an audit is for it to become obvious the records were recreated after the fact, and not as the miles were driven.

Last, you’ll notice that the charitable rate hasn’t changed. It was 14 cents per mile in 1998 and hasn’t changed since. Does Scrooge work for the IRS? Hardly. In a strange quirk of our tax code, it’s congress that’s responsible for the rate allowed for charitable miles driven. Now is as good a time as any to give your local congressperson a call or send a note mentioning that you support bringing this rate up to a more reasonable level.

Step 1: Create a free TurboTax account

Go to TurboTax.com and scroll down to the bottom of the page to choose the type of tax return you would like to prepare. Click the “Create an Account” button and input the required information. There is no charge to create an account and you can even start preparing your return without providing information by clicking on “Try It Free.”

Step 2: Sign in to your new account

When you login to TurboTax, you will see a screen with a series of tabs across the top. Click on the first tab to input some of the personal information the IRS requires you to report on your tax return. The software will generate a tax return with all of your information such as name, address and Social Security number in the appropriate boxes on your tax form. Click “Continue” and check off all the life events that have occurred for you this year.

Step 3: Input deductions

Click through to the “Federal Taxes” tab. This is the tab that allows you to input every single deduction you anticipate claiming on your return this year and saves your information so you can track all deductions as you go. To get started, click on “Deductions & Credits” at the top. TurboTax will guide you through this section and ask you questions about your expenses to insure that you don’t miss any tax-saving deductions. For example, the program asks whether you own a home and for the amount of loan payments you made during the year to calculate the mortgage interest deduction. As you work through this section, the software will ask questions about every possible deduction you may qualify for such as donations to charity, certain car expenses, education expenses, medical expenses, and so forth. When you are finished, click “Done with Deductions.” Since you can save all information, you can update, delete and add any other deductions before you finalize your return and send it to the IRS.

Step 4: Compare your itemized deductions to your standard deduction

When you have no more deductions to add, you will have a choice to claim the standard deduction or the total of all your itemized deductions that TurboTax already had you input. Generally, you will save more in taxes if you choose the larger of the two. If the standard deduction is larger, then you will not be able to deduct many of the expenses you reported on the software.

Fund your 2011 IRA: There is a limit of $5000 or $6000 if you are 50 or older. If you are covered by a retirement plan at work, your deductible amount is limited based on your income. For singles, your contribution is phased out from an income of $56,000 to $66,000 and if your are married, $90,000 or less in modified adjusted gross income gets you a full deduction, and it’s slowly phased out until your MAGI reaches $110,000.

Decide how to handle that Roth conversion: In 2010 something remarkable  happened regarding the rules concerning the Roth IRA. For conversions made in 2010 you could claim the full conversion in 2010 as usual, or you can split the income over two years, and add half the income to your 2011 tax return and half to 2012.

The HSA: If you had an HSA in 2011 you can make your final deposit by the tax return due date, up to $3,050 if you have self-only HDHP coverage and $6,150 if you have family HDHP coverage.  Generally you can claim your contributions as an adjustment to income.

Charitable deductions: In general, when we donate to charity, it’s either by check or credit card for easy tracking. If you’ve donated items such as clothing, books, toys, or furniture to a qualified charity during the year, now’s the time to find that receipt. In fact, now is the time to grab a folder and write “taxes 2011″ and “charitable deductions.” Keep these receipts in order so you don’t miss any potential deductions. If you work for an employer who offers a payroll deduction for charity, often the employer does not send a year end confirmation, your final paystub should serve as proof of the donations during the year, this one is easy to miss.

The state sales tax deduction: You are able to take a deduction for sales tax instead of state income tax if that benefits you. For states with no income tax this is an easy decision. If you had a large purchase such as a car, you may find that sales tax paid over the course of the year was greater than your state income tax.

As we get near the filing deadline, I hope these tips help you uncover some tax savings you may otherwise have missed.  Also remember that TurboTax will guide you through these entries.