Are You Leaving Money On the Table?

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Each year, there are thousands of tax deductions and tax credits available to taxpayers, if you know where to look. 

 

For example, if you have just one dependent child on your tax return you have the potential to qualify  for a multitude of credits and benefits, including the Child and Dependent Care Credit, Child Tax Credit, Additional Child Tax Credit or the Earned Income Tax Credit. The Earned Income Credit and the Additional Child Tax Credit are refundable credits and can even put money back in your pocket!

 

There are also many options for tax credits or deductions if you, your spouse, or your dependent are going back to school.  These include:

  • The American Opportunity Credit: A credit of up to $2,500 for qualified tuition and fees per student.  Up to $1,000 of this credit is refundable, which means you get the credit as a refund if you have any left after your taxes are paid.    
  • The Lifetime Learning Credit: 20% of qualified tuition and fee expenses, up to $2,000 is available.  
  • Student Loan Interest Deduction: Up to $2,500 of student loan interest paid during the year is completely deductible, whether or not you itemize deductions.

 

Other commonly overlooked deductions include:

 

  • Cell phones required for your business
  • Hearing aids, eyeglasses and contact lenses
  • Breast pumps and supplies that assist in lactating
  • Required uniforms and work clothes not suitable for street wear
  • Business gifts up to $25 per customer or client
  • Cleaning and laundering services while traveling
  • Fees for tax preparation or advice
  • Tools bought for use at your job
  • Medical aids including crutches, canes and orthopedic shoes
  • Union dues

  

Be sure you claim all deductions available to you and get all the tax benefits you deserve.

 

How Healthcare Reform Will Impact Your Tax Situation!

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Whether your income level is high, low or somewhere in the middle, everyone will be impacted by the newly signed Healthcare Reform Bill. With so much confusion and misinformation, it’s hard to know what the changes will do to your bottom line.

 

One of the most important things to know is that the revisions will roll out gradually over a span of 10 years, so you will have time to adjust slowly.

The first round of changes will impact your 2010 tax return:

 

• Medicare D Gap Closure Step One: A tax exempt, one-time only $250 payment for those taxpayers, 65 or older, who are affected by the Medicare Part D payment gap, commonly referred to as the "donut hole." The check will be sent automatically by Medicare as soon as the taxpayer hits the donut hole. 

 

• Tanning Tax: As of July 1, 2010, there is now a 10% tax on the tanning service charge for individuals who use ultraviolet indoor tanning services.

 

• Revised Adoption Credit: The maximum credit will increase from $12,150 to $13,170 per eligible child. The increase is retroactive to January 1, 2010, so you may be able to claim the increase credit on your 2010 tax return if you adopted a child after January 1st. There are more details about the adoption credit in the article appearing at the bottom of this page.

The second phase of changes take affect for 2011:

 

• Tax-Free Medical Account Limits: Over-the-counter drugs are no longer eligible expenses for flexible medical spending accounts. Prescription drugs; however, will still be covered.

 

• Increased fines for Health Savings Accounts (HSAs) abusers: HSA and Archer MSA distributions used for non-qualified medical expenses are now subject to a 20% penalty. This is an increase of 10% and 5% respectively.

 

After 2011, the next major round of changes will take effect in 2013, with some of the most significant changes impacting higher income taxpayers. Joint filers with an AGI over $250,000 or single filers with an AGI over $200,000 may be subject to additional Medicare taxes:

            • Wages - Medicare tax on earned income will increase from

            1 .45% to 2.35% on incomes beyond the $250,000/$200,000 amounts.

 

• Investment income - A new 3.8% medicare tax on investment income over
$250,000/$200,000, including interest, dividends, capital gains, rent and royalty income. Retirement account investment income is exempt.

 

Those are just a few of the many changes that taxpayers can expect to see over the next few years. Speak with your tax preparer if you have specific questions or need more information.

 

 

Increased Education Credits for 2010!

 

Through the American Reinvestment and Recovery Act of 2009 (ARRA), signed in early 2009, the credit formerly known as the Hope Credit has increased to a maximum of $2,500 of eligible expenses for the first four years of post-secondary education. This expanded credit, now called the American Opportunity Tax Credit, is available for tax years 2009 and 2010. The credit also includes the cost of books and software required for courses.

Other education-related deductions & credits include:

 

• Deductions for Required Software and Other Expenses: For tax years 2009 and 2010, the cost of Internet access and technology, such as laptop or desktop computers, are considered qualified distributions from a section 529 (college savings) plan. Students enrolled in an eligible institution can use tax-free distributions from the program to pay for these qualified education-related expenses.

 

• Lifetime Learning Credit: Available to individuals paying qualified tuition and related expenses at an eligible post-secondary educational institution. This credit is available in any year for as few as one class a year. A taxpayer cannot claim the Lifetime Learning Credit and American Opportunity Tax Credit for the same student in the same year.

 

Contact your local Jackson Hewitt office for more details about the American Opportunity Tax Credit.

 

Expanded Adoption Credit Available for 2010!

 

The expanded adoption credit included in the Affordable Care Act, raises the maximum adoption credit to $13,170 per child, up from $12,150 in 2009. In addition, the credit is now refundable, which means that eligible taxpayers can get the credit even if they don’t owe taxes for this year!

 

The credit is based on certain expenses related to a legal adoption, including: adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply.

 

In addition to filling out the required Form 8839, Qualified Adoption Expenses, eligible taxpayers must also include one or more adoption-related documents, which can be found on the IRS website: www.irs.gov.

 

Since adoption-related documents will have to be submitted with the tax return, the IRS requires all returns with Qualified Adoption Expenses be submitted as paper returns.

Taxpayers can still use IRS Free File; however, the returns must be printed out and mailed to the IRS, along with all required documentation. Ask your tax preparer for complete details.

 

 

 

Tax Updates for Small Business Owners!

 

As a small business owner, there are some important tax issues that you should be aware of this year that could impact your 2010 profit or loss reported on your tax return.

 

• Married taxpayers that operate a small business together may split the Schedule C income and expenses onto a Schedule C for each spouse if filing a joint tax return instead of being required to file a partnership return.

 

• The direct deduction for start-up expenses has been increased to $10,000 (up from $5,000).

 

• The business standard mileage rate has changed to $0.50 per mile from January 1, 2010 to December 31, 2010.

 

• The maximum section 179 deduction has been increased to $500,000 and the maximum property limits has been increased to $2,000,000.

 

• Special bonus depreciation of 50% of the basis of the asset is allowed for assets placed in serving during 2010. This special depreciation amount is added to the regular depreciation to increase the allowed deduction.

 

• You may deduct up to 100% of health insurance premiums if the plan is set up through your business, your spouse is an employee of the business and covered by the plan, and you are covered under your spouse’s family plan. Amounts paid to cover your employee spouse is an allowed business deduction and excludable from the spouse’s income.

 

• Self-employment tax may be adjusted for the cost of qualifying health insurance for self-employed taxpayers.

 

Questions? Contact your local Jackson Hewitt office for complete details.

 

 

TaxTips

Gifts that are given in 2009 and 2010, valued at under $13,000 are not required to be reported on a Gift Tax Return?  Generally, there is no gift tax due until the taxpayer has given a lifetime maximum of over $1 million gifts.

 

The following gifts are exempt form annual limits: gifts to your spouse, charitable donations, political donations, tuition or medical expenses paid directly to an educational or medical institution for someone else’s benefit.

 

Think Learning to Prepare Taxes is Hard? Think Again!

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Learn to prepare taxes this fall…and you could be ready to earn extra income by January!* It’s easier than you think!

The Jackson Hewitt® Basic Income Tax Course is a progressive tax education program for the beginner student—no prior tax preparation experience needed. In simple, easy to understand language, you’ll work through sample problems and learn how to complete tax forms and schedules. After completing the course, you’ll have the skills and knowledge necessary to prepare individual income tax returns. A valuable skill that could even lead to extra income during tax season.

And, because everyone’s learning style is different, Jackson Hewitt offers three ways to take the course!

• Traditional—textbook version led by an instructor in a Jackson Hewitt office.

• Computerized—self-paced, using computers inside a Jackson Hewitt office and facilitated by our instructors.

• Online**—on your own time, from any Internet-connected computer—but, with the added benefit of assistance and support at a local Jackson Hewitt office.

Regardless of the learning format you choose, you’ll get access to knowledgeable instructors with real tax preparation experience.

Find out how to enroll, by contacting your local Jackson Hewitt office.

 

*Enrollment in, or completion of, the Jackson Hewitt Basic Income Tax Course is neither an offer nor a guarantee of employment. Additional training, experience or skills may be required. Class schedules vary by location. Call for details.

**May require on-site attendance and is not available in all states. Call for details. Most offices are independently owned and operated.

 

 

Homebuyer Credit deadline extended to September 30th!

 

Eligible taxpayers who qualified for the $8,000 First Time Homebuyer Credit, will now have until September 30, 2010 to close on their newly purchased home.

The closing deadline extension from June 30th to September 30th is for qualifying homebuyers who entered into a binding contract on or before April 30, 2010.

Plus, homebuyers do not need to wait to file their 2010 tax return to receive this one-time credit. Simply bring your closing documents and a copy of your 2009 tax return to your local Jackson Hewitt office and we can amend your 2009 tax return so you can get your credit now.

For more information, contact your local Jackson Hewitt office.

 

 

Do You Qualify for the Home Office Deduction?

 

If you use a portion of your home for business purposes, you may be able to take a home-office deduction that could have a positive impact on your tax return!

To claim a business deduction for your home, you must use a part of your home exclusively and regularly:

• As your primary place of business, or

• As a place to meet or deal with patients, clients or customers as a routine part of your business, or

• A separate structure that is not attached to your home and is used in your business.

For certain storage uses, or day-care facility use, you are required to use the property regularly, but not exclusively.

The amount you are permitted to deduct depends on the percentage of your home that is used for business. Your deduction for certain expenses is limited if the gross income from your business is less than your total business expenses.

Different states have different policies on record keeping; contact your State Tax Authority for complete details.

 

 

Good Record Keeping Can Make All the Difference Next Tax Season!

 

Which records should you keep? And, for how long? Make sure you know all the facts, so you won’t have any surprises at tax time!

Keep accurate records and tax time can be hassle free—even if the IRS selects your return for an audit. It’s not too late to establish good record-keeping habits that you can practice all year long.

Keep these handy tips in mind:

• Tax records should be kept for three years after you file your tax return.

• Certain items, including home purchase or sale documents, stock transactions, Individual Retirement Account (IRA) and rental property receipts, should be kept longer.

• The Internal Revenue Service (IRS) usually doesn’t require records to be kept in any specific manner; however, you should safely store any and all documents that may impact your federal tax return.

• Be sure to keep any records that would support deductions or credits that you claim on your tax return. These records include: bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks and proofs of payment.

For more detailed information on good record keeping, visit www.irs.gov or contact your local Jackson Hewitt® office.

 

 

Letter from the IRS? First...Don’t Panic!

 

If you’ve received a letter from the IRS, it can be stressful. But, did you know that the IRS lists more than 50 different types of taxpayer notice letters on their website?

 

Just a few common topics include:

• You may need to repay your First-Time Homebuyer Credit from 2008

• Your refund check was returned to the IRS and they need an updated address

• You may qualify for the Additional Child Tax Credit and be entitled to some additional money

• The IRS needs documentation of your tax-exempt status

 

Many of these letters can be dealt with simply and painlessly. So, if you do get a letter, don’t panic. Contact your local Jackson Hewitt Tax Service® office. We may be able to help.

 

 

TaxTips

 

Did you know that your child’s summer day care expenses may qualify you for an income tax

credit? If you work or are looking for work and have to pay for the care or your children, under the age of 13, during the summer school break, those expenses may help you get a credit on next year’s tax return. Ask your tax preparer for

complete details.

 

It's Time to Schedule Your Mid-Year Tax Review!

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You’ll be thankful you did!

 

Summer is a great time to spend a few minutes reviewing your current financial status so you can get a better sense of your overall tax situation. And, knowing how to make mid-year adjustments and take advantage of applicable tax benefits prior to year end can prove beneficial before 2010 draws to a close.

A few things you can do right now:

• Review your financial profile - Jot down questions you have so you can discuss them with your tax preparer. It’s possible to make adjustments now that will benefit you at tax time.

• Make sure your withholdings are accurate - It has a direct impact on your tax return each year.

• Evaluate what you are saving and how - Ask your tax preparer how you can maximize your savings and your tax benefits.

• Plan for the future - Benefits you now and in your retirement.

• Keep an eye on tax-saving strategies - Common activities may lead to tax benefits.

• Go see your doctor - Qualified medical expenses may be tax deductible.

• Buy a computer using funds from your 529 plan -The purchase may qualify for a tax-free distribution plan.

• Give back - Charitable contributions may be tax deductible, provided you have proper documentation.

• Commit to getting organized - Keep important documents and receipts on file now for a stress-free tax experience next spring.

Don’t go it alone—many of our offices are open all year to help you!

Find a local office and schedule your mid-year tax review today at www.JacksonHewitt.com

 

Did you get every credit and deduction you deserved this tax season?

 

Are you certain that you got everything you were entitled to for 2009? How about in 2008 or even 2007?

 

Jackson Hewitt® can review up to three years of prior tax returns—whether they were prepared by you or another tax preparation company. If they find any errors, or missed deductions or credits, they can file your Amended Return for a fee.

 

Who knows? You just may be entitled to more money back!

 

Contact your local Jackson Hewitt office today to schedule

a review of your prior-year tax returns.

 

New Tax Benefits for Hiring Unemployed Workers!

 

There are two new tax benefits available to employers who hire previously unemployed  workers or workers who have been working less than full-time. The provisions are part of the recently enacted Hiring Incentives to Restore Employment (HIRE) Act.

 

Employers who hire unemployed workers between February 3, 2010 and January 1, 2011 may qualify for a 6.2% payroll tax incentive, which exempts them from paying their share of Social Security taxes on wages paid to these workers after March 18, 2010 and through December 31, 2010. The reduced tax withholding has no effect on the employee’s future Social Security benefits and employers are still required to withhold the employee’s share of Social Security taxes and income taxes.

 

Plus, new hires that are retained for at least one year, qualify businesses to an additional general business tax credit of up to $1,000 per worker when they file their 2011 income tax returns.

If you would like to find out more about this great tax incentive, visit the IRS website at www.irs.gov.

 

Earned Income Credit increases continue for 2010!

 

Qualifying taxpayers could be entitled to a credit of up to $5,666!

 

For tax years 2009 and 2010, there is an additional Earned Income Credit (EIC) range for taxpayers with three or more qualifying children.

Credit for 1 qualifying child—$3,050 (up from $3,043)

Credit for 2 qualifying children—$5,036 (up from $5,028)

Continuing for 2010! Credit for 3 or more qualifying children—$5,666 (up from $5,657)

Credit for taxpayers with no children—remains $457

 

Ask your tax preparer for details.

 

Think learning to prepare taxes is hard?

Think again!

 

Learn to prepare taxes now…and you could be ready to earn extra income by January!*

It’s easier than you think!

 

The Jackson Hewitt® Basic Income Tax Course is a progressive tax education program for the beginner student—no prior tax preparation experience needed. In simple, easy to understand language, you’ll work through sample problems and learn how to complete tax forms and schedules. After completing the course, you’ll have the skills and knowledge necessary to prepare individual income tax returns. A valuable skill that could even lead to extra income during tax season.

 

And, because everyone’s learning style is different, Jackson Hewitt offers three ways to take the course!

• Traditional—textbook version led by an instructor in a Jackson Hewitt office.

• Computerized—self-paced, using computers inside a Jackson Hewitt office and facilitated by our instructors.

• Online**—on your own time, from any Internet-connected computer—but, with the added benefit of assistance and support at a local Jackson Hewitt office.

 

Regardless of the learning format you choose, you’ll get access to knowledgeable instructors with real tax preparation experience.

 

Find out how to enroll, by contacting your local Jackson Hewitt office.

 

*Enrollment in, or completion of, the Jackson Hewitt® Basic Income Tax Course is neither an offer nor a guarantee of employment. Additional training, experience or skills may be required. Class schedules vary by location. Call for details.

**May require on-site attendance and is not available in all states. Call for details. Most offices are independently owned and operated.

 

TaxTips

Are you currently unemployed? If you are looking for a job in your current profession and can itemize your deductions, certain expenses may qualify as miscellaneous deductions. Employment agency fees, resume printing, phone calls, and mailing expenses are all examples of deductible items. And, don’t forget that you are also permitted to deduct any mileage traveled while job hunting.