As the tax-filing deadline approaches, it’s time to start gathering official documents and determining what Uncle Sam might deem a worthy deduction.
Professional tax preparers believe some people may be shocked to find their refund isn’t as much as they hoped for.
Michelle Fox, of Safeguard Business Services, a mobile CPA based in Cherokee County, said some of her clients are learning that what the government was withholding from their paychecks wasn’t as much as they thought—leaving their refunds smaller.
“It’s because they didn’t realize the change in their withholding,” Fox said. “Originally, when this whole recovery act went into place, they re-issued the withholding tables; they were going to withhold less on your paycheck than what had been withheld in the past. It wasn’t anything you were notified of; it just happened in the background.”
One bonus some taxpayers may see this year is under the Make Work Pay credit. Those with eligible income could get a $400 bonus on their refund check.
Taxpayers filing as single with an income of $75,000 or less should qualify for $400. A married couple filing jointly with a combined income of up to $150,000 could get $800 on their refund check.
Some higher-income earners can qualify for a percentage of that credit. Single filers making between $75,000 and $95,000 and a married couple filing jointly with an income of $150,000 to $190,000 can qualify for a percentage of the credit.
“Individuals receiving Social Security benefits, disabled veterans and others on fixed incomes will receive one-time payments of $250,” said Dale Graham, of Dale Graham Accounting. “If the individual also qualifies for the Make Work Pay credit, his or her credit will be reduced by the $250 payment.”
Local tax preparers say the credit is a special line item on the tax documents, so be sure to look for it or remind the tax preparer.
The first-time homebuyer program is a little different this year. According to Graham, homebuyers no longer have to pay back the credit.
“The new law removes the repayment requirement for homes purchased by first-time buyers between Jan. 1, 2009, and Dec. 1, 2009,” she said. “The enhanced credit equals 10 percent of the purchase price of a home up to $8,000 ($4,000 for married individuals filing separately). There are income limitations, which preclude higher-income individuals and couples from taking advantage of the credit.”
There also is a tax credit for people who have lived in their home for 10 years or more, sold it and bought a new one. That refundable credit is $6,500, experts say.
Both homebuyer credits are refundable, meaning, if a person doesn’t owe taxes, that money can be recouped by the taxpayer.
A non-refundable credit, like the one that deals with some electric vehicles, cannot be used unless the taxpayer owes money.
“The electric cars, specifically golf carts, if you had bought a golf cart that qualified, you can get a credit of as much as $5,000, even though the golf cart only costs $5,100,” said David Stoker, of Woodstock-based Currie & Stoker. “The drawback to that one is the credit is non-refundable. So if you did not owe, you don’t get the money.”
Local tax experts say it’s important to make sure to find all the deductions possible. Common deductions include charitable gifts, student loan interest, ad valorem tax on cars, house interest and house taxes.
Charitable gifts need to be well documented, officials say. There need to be receipts for all donations and itemized documentation for donations to places like Goodwill and Salvation Army. Both have valuation guides on their Web sites, www.goodwill.com and www.salvationarmy.com.
Those who made cash donations by the end of January to Haiti relief can deduct that on their 2009 tax return. Like with other charitable contributions, make sure to keep documentation of the donation.
There also have been changes to the education credit, and there are several things of which to take advantage. It applies to anyone paying for children in college or those who went back to school to do things like change careers in light of the economy or strengthen their credentials.
“No one should pass up checking into that whether it’s on their children or on themselves,” said Mark Yates, of Woodstock-based Yates and Company.
Fox said the biggest change to the education credit rules is that the credit has never been refundable—now it’s refundable up to $1,500, she said. Books also are now included.
Those who lost their jobs and collected unemployment must pay income taxes on that money—if it’s $2,400 or more. Anyone who paid for Cobra insurance may be able to deduct those premiums, and anyone who lost their job and had to dip into their 401(k) for health insurance premiums won’t owe the 10 percent penalty, officials said.
While some job-hunting expenses are deductible, buying a new suit for an interview is not. Stoker said the cost of resumes, the cost to mail them or a flight for an interview are some of the things that are deductible.
Yates said people need to make sure to be able to document all of their deductions, because the IRS has beefed up their force and is ready to collect.
“We have seen an increase in inquiries by the IRS in the last couple of years, compared to the last 20 years,” said Yates, a former IRS agent.
To seek professional assistance for tax preparation, contact Currie & Stoker, 202 River Park Drive, Woodstock, at (678) 888-0013; Safeguard Business Services, www.safeguardcpa.com, at (404) 422-8572; Yates and Company, 4595 Towne Lake Parkway, Building 300 Suite 220, at (770) 591-8887; and Dale Graham Accounting, www.dalegrahamcpa.com, at (404) 680-7577.
