If you will owe federal taxes for 2009, you may still qualify for other tax breaks. Several ARRA provisions, like the Making Work Pay and First-time Homebuyers Credits, have received a lot of press, but taxpayers don’t necessarily realize how much more is included in the stimulus package. Even if you don’t normally file a return, there are refundable credits, like the earned income and additional child tax credits, which could make filing worthwhile this year.
“The 2009 tax law changes cover a wide range of topics and life events. However, several credits and deductions, especially those in the economic stimulus package, require action well before April 2010. As a general rule of thumb, it’s a good idea to do a little tax research before making decisions related to homes, college, retirement and cars. Doing so could save hundreds, even thousands, on your 2009 tax return,” explains Jessi Dolmage, spokeswoman for 2nd Story Software, the makers of TaxACT.
In order to capitalize on ARRA provisions, Dolmage recommends:
1. Collect all 2009 tax documents, and organizing them by topics such as:
* Child and dependent care
* Education expenses
* Medical expenses
* Vehicle taxes paid
* Real estate taxes
* Mortgage interest paid
* Charitable contributions
* Business or employee expenses
* Investment transactions
* Retirement contributions
* Energy efficiency property expenses
* Household employee expenses
* Alimony expenses and/or income
Be sure to create a section for official tax documents such as Form W-2s, Form 1099’s, Schedule K-1, etc.
You should also include a copy of your 2008 tax return for reference and for your Adjusted Gross Income or Self-select Personal Identification Number if you want to e-file your 2009 return. (E-filing with direct deposit is considered the fastest and most accurate way to file and get your refund.) Being organized will bring peace of mind and expedite tax preparation time.
2. Learn about the ARRA and other 2009 tax law changes at www.IRS.gov. In addition, all wage earners and those receiving retirement income should review their federal withholding per the Making Work Pay Credit. If you have more than one job, you and your spouse both work, or you can be claimed as a dependent, you are even more likely to be withholding too little income tax, possibly causing you to owe taxes.
An overview of the ARRA and a Making Work Pay Calculator are also available at www.TaxACT.com/recovery-act.
3. Start your federal return early using a free do-it-yourself tax preparation solution. (Skipping the second tip makes this one even more important.) After entering some basic information, see how 2009 tax law changes will affect your bottom line. Doing so may introduce you to credits and deductions you may otherwise miss, save time when you’re ready to file and reduce errors (because you won’t be rushing).
All taxpayers – regardless of income or how complex their returns are – can prepare, print and e-file their IRS returns for free with TaxACT Online Free Federal Edition. You can choose between a question and answer interview format and a quick entry method, both of which can be done at your own pace.
The ARRA has made taxes more of a year-round topic and proves that early tax preparation can be a very simple and smart way to save a lot of money.
Courtesy of ARAcontent