Jeff Haywood, CPA

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4 Credits That Can Pay You at Tax Time

March 25th, 2011 | Author: admin

Four Credits That Can Pay You at Tax Time:

Mr. IRS please help me. I need a refund because my gross habits exceeded my net income. Are there any credits available that can help me? Funny you should ask. The IRS published this list of 4 Credits That Can Pay You at Tax Time:

Four Credits That Can Pay You at Tax Time

IRS Tax Tip 2011-43, March 2, 2011

You might be eligible for a valuable tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable, which means you might receive a refund rather than owe any taxes at all. Here are four popular tax credits you should consider before filing your 2010 Federal Income Tax Return:

1. The Earned Income Tax Credit is a refundable credit for certain people who work and have earned income from wages, self-employment or farming. Income, age and the number of qualifying children determine the amount of the credit. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check their tax form instructions, the listed publications and additional information available at IRS.gov. IRS forms and publications are available on the IRS website at http://www.irs.gov and by calling 800-TAX-FORM (800-829-3676).

Links:

1040 Central
Publication 596, Earned Income Credit (EIC) (PDF 281K)
Publication 972, Child Tax Credit (PDF 128K)
Publication 503, Child and Dependent Care Expenses (PDF 167K)
Saver’s Credit
Form 1040 Instructions (PDF 1,101K)

Did you understand what a refundable credit is? A non-refundable credit can be used only to reduce taxes owed to the IRS. In other words they can only help to reduce your taxes on your 1040 to zero. If you paid in money to the IRS this can result in a refund to the extent that you paid taxes in to the IRS. On the other hand, a refundable credit can generate a refund even beyond any taxes you paid in during the year. So with a refundable credit even if you owed no tax you could still get money back beyond what you paid in.

Another example of a refundable credit, not mentioned in the IRS Tips above, is from the American Opportunity Credit for tax years 2009 and 2010. These are helpful credits related to paying for post-secondary education. For more information about this credit see my previous post – Education Credits – American Opportunity Credit.

To have an experienced CPA help you prepare your tax returns and help you reach your goals contact me at the phone number below.

Jeff Haywood, CPA
972-439-1955
jeff.jhtaxes@gmail.com

I prepare the following types of tax returns:

Personal
Business
Estates
Trusts
Federal and State Returns

Also, I am available for tax planning and discussions about business, retirement planning and life goals.

For more US income tax content see the following links:

10 Things to Know About the Child and Dependent Care Credit
10 Important Facts About Capital Gains and Loses
IRS: Beware of Tax Scams
IRS Top Ten: Mortgage Debt Forgiveness
IRS Top Ten: IRA Contributions
US Income Tax Help for Expatriates
4 Credits That Can Pay You at Tax Time
What Business Deductions Can I Take as an Employee? IRS Tax Tips.
Was This Year a Bad Year? We may be able to get you a refund of your taxes paid in prior years.
6 IRS Tax Tips for Self-Employed Individuals
Important IRS Tax Tips: Health Insurance Tax Breaks for the Self-Employed
6 Things the IRS Wants You to Know About the Home Office Deduction
Is Your Child’s Investment Income Supposed to be Taxed at Your Tax Rate?
IRS Notice – Don’t Panic – Call Me
Who Can I Claim As A Dependent?
Which Filing Status Should I Use?
Do I Have To File A Tax Return For 2010?
6 Things You Should Know About Business Expenses – What You Can Deduct
Top Four Reasons Clients Hire Me To Prepare Their Tax Returns – Individual and Business
Instant Convenient Access To Your Tax Returns and Documents
How To Avoid the Social Security Penalty and Does Warren Buffett Get Penalized??
5000 Birds Fall From the Sky – Casualty Losses
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2010: “A Last Minute Checklist”
Energy Credits
ROTH IRAs
Traditional IRAs
Year-End Tax Planning Tips
Education Credits-American Opportunity Credit
ROTH IRA Conversion

As always keep in mind that the content provide on this site is general in nature and may or may not apply to your particular case. It is best to check with a tax professional about your circumstances and what is best for you personally. Also, IRS regulations and tax laws are constantly changing and the information on this site is not constantly updated. Again please check with me about your particular circumstances and what will be best in your situation at the given time and law.

This article was written by Jeff Haywood, CPA.
Jeff is a licensed CPA in both Texas and Illinois.
He has prepared income tax returns for the public for over 10 years.
He also has an MBA in Finance from Loyola University in Chicago and he has 24 years experience in Corporate Finance and Business Analysis.