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[March 02, 2014]
Taxpayers have several credits available [The Hawk Eye, Burlington, Iowa :: ]
(Hawk Eye, The (Burlington, IA) Via Acquire Media NewsEdge) March 02--The heart of the tax season is upon Americans and tax preparers, and several tax credits can be taken advantage of by middle- to low-income wage earners.
Families with children in college can benefit from the American Opportunity Credit. The credit was due to expire at the end of 2012, but was extended to 2017 by the American Taxpayer Relief Act of 2012.
A family can claim a maximum credit of $2,500 per student, if college expenses exceed $4,000 for the school year. The college tax credit can be used by individuals with less than $80,000 income or couples filing a joint return with less than $160,000 income.
"Part of it is a refundable credit," said Mike Dick, a certified public accountant and shareholder with CPA Associates PC in Burlington.
If an individual or couple qualifies for the maximum credit, $1,000 will be refunded, while the remaining $1,500 will offset the taxes they owe the Internal Revenue Service.
Dick said the American Opportunity Credit can be used for only four years per student. If a student extends the learning process to a fifth year, the Lifetime Learning Credit can be applied. The maximum credit per year is $2,000, as an individual or family can claim 20 percent of tuition, fees and books up to $10,000.
The Earned Income Credit applies to moderate- to low-income families, particularly if they have children. The amount refunded to the taxpayer is determined by the number of children they have.
If a couple's annual income in 2013 falls below $37,870 to $51,567, the credit depends on the number of children they have. They could claim a maximum refund of $3,250 per year with one child, $5,372 with two children or $6,044 with three or more qualifying children.
Dick said the refund typically maxes out at $10,000 in income and starts phasing out at $20,000.
"The Earned Income Credit is about 5 percent of our returns," Dick said of CPA Associates' clients.
The Earned Income Credit has been one that Americans have abused to their benefit, Dick said.
"The IRS has cracked down on preparers. We have to ask (taxpayers) certain questions," Dick said. "We had to attach additional documentation. We have to make sure it's right." Residential Energy Tax Credits are available to homeowners, who make improvements or install appliances designed to boost the energy-efficiency of a home.
Qualified energy-efficient products include: furnaces, central air conditioners, heat pumps, water heaters, exterior doors, exterior windows and skylights, insulation, hot water boilers, advanced main air circulating fans, and certain metal or asphalt roofs.
The maximum credit a homeowner can claim is $500 for a lifetime. An individual can't take the full credit at one home and do the same at the next home they purchase.
Dick said it used to be a homeowner could claim the entire $500 by installing an energy-efficient furnace. Any more, a homeowner is given a certain percentage of the $500 for installing doors, windows, a furnace and such.
A Retirement Savings Credit is available to taxpayers who contribute to a 401(k) or an IRA. The maximum amount of credit is 50 percent per taxpayer of the first $2,000 of eligible contributions.
The credit is available to single, qualified widow(er) or married couples filing separately, who earn $29,500 or less; or head of household filing status making less than $44,250; or married couples filing jointly making less than $59,000.
Dick said with the complexity of the tax laws, it is wise to have a preparer look over a wage earner's income tax return.
Business for Dick and CPA Associates began hot and heavy the first week of February.
"We've picked up new clients this year," Dick said.
CPA Associates expected a hectic tax season, and sent a letter out to clients in December informing them to get their paperwork in as soon as possible.
A recent trend has made it harder on tax preparers as S corporations and partnerships are sending out 1099 forms to investors by Feb. 15 or later.
Dick said many local investors in Catfish Bend Casino, received their 1099s late last year, which delayed tax preparation further.
The three deadlines, taxpayers and preparers are dealing with are March 1 for farmers, March 15 for corporations and April 15 for everybody else. If a farmer pays their entire tax on March 1, they don't have to pay quarterly estimates through the year.
Tax time brings on the hours for those preparing returns for individuals or companies. Dick has been coming to work at a 4:45 a.m. and staying until 9 p.m. or 10 p.m., seven days a week. That will continue until April 15.
___ (c)2014 The Hawk Eye (Burlington, Iowa) Visit The Hawk Eye (Burlington, Iowa) at www.thehawkeye.com Distributed by MCT Information Services
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