The holidays have come and gone. Its a brand new year. Ready or not, the tax season is upon us and April 15th looms just ahead. As Benjamin Franklin reminded Americans more than 220 years ago, the only things that are certain in life are death and taxes.
Already tax payers across America are scratching their heads, digging in file cabinets, boxes and even their kitchen cupboards searching for any potential receipts that may be used as a deduction for their 2012 federal return. Despite promises to ourselves that next year we will be more organized, it doesnt always happen and we are left scrounging around to find any potential tax break. Those receipts, cancelled checks and payment stubs are necessary backup for any deductions that will be claimed on your tax returns. Gather mortgage payment records, real estate and property tax payments and any costs associated with refinancing or selling your home. Taxpayers should keep track of any travel for company business, including hotels, car rentals, airfare and mileage. Hold onto receipts for business fees, professional association fees and any other work-related expenses you paid out of pocket. If you were laid off from work, stash away receipts that are related to your job search, such as travel expenses and mileage as they may be deductible. If you are a business owner, hold onto any related bills such as mortgage, property tax, utilities, supplies and medical expenses. When in doubt, file it and keep it
For those searching for employment, file away phone expenses, mileage and postage. If you were hit with a natural disaster such as flood, tornado and earthquake, you may be able to claim deductions. If you are self-employed, the list of deductions is extensive. Mileage, cell phones, internet service, your health insurance payments, meals and other travel expenses are just some examples of costs that can be deducted when filing your taxes. Keep a daily log in your vehicle that includes dates and mileages for work-related travel. Dont forget to gather any retirement income or Social Security statements, along with any IRA contributions.
With the last minute, down to the wire vote to avert the fiscal cliff, tax breaks for many families have been extended. According to Celeste Simcox Dunn, owner of the local H&R Block located on Route 421 in Mountain City, a permanent extension of the Bush era tax cuts was passed, meaning there will be no tax increase for individuals making under $400,000 or a joint income under $450,000. The passage also granted a permanent extension of Child Tax Credit, allowing $1,000 for each qualifying child, along with a temporary extension of the Earned Income Credit for taxpayers with up to three children.
The American Opportunity Tax Credit was also temporarily extended through 2013. This tax credit of up to $2,500 helps reimburse students for costs associated with their education, such as tuition, fees and books. This credit may be claimed by the student or parents, but not both.
The patch for Alternative Minimum Tax, separate from income taxes, was also permanently extended. The payroll tax cut has expired, and most Americans will see an increase in the amount of money they pay into the Social Security fund from 4.2 percent to 6.2 percent. Educators are able to claim a $250 expense deduction that can help compensate for out of pocket educational expenses. The $500 non-business Energy Care Credit has also been continued. Energy efficient doors, windows, water heaters, insulation, roofing and some heating and air conditioning units may qualify to help you claim this tax credit.
If you itemize on your federal return, residents of Tennessee can now recoup some of their state and local taxes. If you have all your receipts, you are able to claim the entire amount of Tennessee sales tax you paid during the year. You may also choose the Safe Harbor option that will calculate a percentage of your total income. Its best to save receipts, said Dunn. It adds up.
According to Dunn, the IRS is not accepting federal tax returns until January 22, 2013. Returns cannot be processed without your actual W-2(s), or statement of earnings, received from your employer. The return may be started using the last paycheck of the year, but nothing may be finalized until the W-2 is in hand. Employers must provide their employees their W-2 by January 31st.If you are waiting on an unemployment statement, you may check the states online site. We are happy to check it if they dont have access to the Internet, said Dunn.
There are many ways to file your federal tax returns. There is a whole world of tax-preparation software that is available, including TurboTax, TaxAct and Tax Works. Returns may also be filed directly through IRS.gov. Filing electronically allows a faster turnaround time, with refunds deposited directly into your bank account in approximately eight days. If you do not have a bank account, returns can be sent via an income tax debit card.
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