Tax time is here, are you prepared?

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Posted: Thursday, February 13, 2014 8:51 am

All tax forms needed to file 2013 taxes have been mailed, and many have been received. However, many individuals will wait to last minute to file their taxes.

“Usually, individuals who are expecting a tax return will file early,” said Jody Singleton, CPA. “Individuals who usually owe the Internal Revenue Service usually wait until the last minute. This allows that individual a little extra time to put back the funds to pay what taxes may be due. But rest assured, many will have to make payments, as well. That is why I encourage everyone to keep great records throughout the year. Keeping great records and receipts can be overwhelming sometimes, but it can also save you money in the long run, when it comes to filing your taxes.”

Trying to find the right tax preparer to complete your tax returns can be tricky.

“When it comes to trying to find someone to file your taxes, I encourage everyone to use a certified public accountant or an enrolled agent,” Singleton said. “Both have the required professional training hours needed to stay on top of all the changes taking place with tax breaks. Currently, there are not a lot of regulations in place that govern tax preparers. So my advice is, make sure you use someone with a lot of experience and training hours to ensure your taxes are done correctly.

“As you close in on the time to file your 2013 tax returns, here are some things to remember. You can certainly cut your tax bill by claiming all the breaks you deserve, including some you may have forgotten or never even knew about.”

Singleton has provided several tax breaks that individuals may be under the impression had expired. But Congress reinstated the following breaks, and they are available during the 2013 tax returns. They are as follows:

 » American Opportunity Credit - Unlike the Hope Credit, the American Opportunity Credit is good for all four years of college (not just the first two). Don’t shortchange yourself by missing this critical difference. This tax credit is based on 100 percent of the first $2,000 spent on qualifying college expenses and 25 percent of the next $2,000 - for a maximum annual credit per student of $2,500.

 » Lifetime Learning Credit - This credit can be claimed for any number of years and can be used to offset the cost of higher education for yourself or your spouse . . . not just for your children. The credit is worth up to $2,000 a year, based on 20 percent of up to $10,000 you spend for post-high-school courses that lead to new or improved job skills. Classes you take even in retirement at a vocational school or community college can count. If you brushed up on skills in 2013, this credit can help pay the bills.

 » Energy-Saving Credits - It appears that 2013 may actually be the end of the road for credits for most Energy-Saving Home Improvements. The current tax credit is worth 10 percent of the cost of qualifying energy savers, such as new windows and insulation. (It expired before, in 2011, but was retroactively revived for 2012 and 2013.) If you made qualifying improvements in 2013—and you did not use up the maximum $500 credit (only $200 of which can be for windows) in earlier years—be sure to cash in with your 2013 return.

 » Student Loan Interest paid by Mom and Dad - Generally, you can deduct mortgage or student-loan interest only if you are legally required to repay the debt. But if parents pay back a child’s student loans, the IRS treats the money as if it were given to the child, who then paid the debt. So a child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student-loan interest paid by mom and dad. And he or she doesn’t have to itemize to use this deduction. (Note: mom and dad can’t claim the interest deduction, even though they actually foot the bill, because they are not liable for the debt).

 » Child-Care Credit - A credit is so much better than a deduction, because it reduces your tax bill dollar for dollar…so missing one can cost you a bundle. If you pay for child care while you are at work, you may qualify for a tax credit worth between 20 percent and 35 percent of what you pay for child care up to $6,000 for the care of two or more children.

 » State Income Tax Paid - If you paid tax with your 2012 state income tax return, remember to include that amount in your state-tax deduction on your 2013 federal return, along with state income taxes withheld from your paychecks or paid via quarterly estimates during 2013.

 » Out-of-Pocket Charitable Deductions –It’s hard to overlook the big charitable gifts you made during the year, but little things add up too. You can write off out-of-pocket costs incurred while doing work for a charity. (For example, ingredients for cakes you prepare for a nonprofit organization’s raffle and postage you buy for your child’s school’s fund-raising mailing count as charitable contributions.) Keep your receipts, if your contribution totals more than $250. You will also need an acknowledgement from the charity documenting the support you provided. If you drove your car for charity in 2013, remember to deduct 14 cents per mile, plus parking and tolls paid.

 » Estate Tax on Income in Respect of a Decedent - This sounds complicated, but it can save you a lot of money, if you inherited an IRA from someone whose estate was big enough to be subject to the federal estate tax. Basically, you get an income-tax deduction for the amount of estate tax paid on the IRA assets you received.

“These are just a few of the breaks that may apply,” Singleton said. “There are several. It really just depends on that individual’s situation. That is the reason it is so important to find a trained tax preparer.”

For more information on tax topics and concerns, call Jody Singleton at 785-5172.

 

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