Tax Tips to Save You Money

Posted March 5th, 2008 by NFAN
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Taxpayers have about one more month to file their 2007 taxes, but there is no reason to wait until the last minute. The sooner you file the sooner you will get your refund, or the sooner you can get that payment out of the way. Here are a few tips to keep in mind this taxing time of year:

1. Get a Faster Refund

Direct Deposit

There are a few steps you can take to ensure a faster refund. Whether you file electronically, by mail or through authorized tax preparer, you will get your refund faster by choosing direct deposit.

According to the IRS, over 61 million taxpayers used direct deposit for their 2006 tax refunds. Not only is it faster, but direct deposit is safer because there’s no way for your refund to get lost in the mail. Follow the “Refund” instructions on your tax return.

Electronic Filing (e-filing)

E-filing, or filing online, is an already popular option that gets more popular every year. Like direct deposit, this is a secure IRS-recommended option, which, according to the IRS will get you your refund in about half the time compared to paper returns.

You may have the option to split your refund and electronically direct it into up to three checking or savings accounts and three different financial institutions. If you would like to deposit your refund into your set-aside account, please call Client Services at 1-888-828-4673.

Check with your bank first to make sure they allow split deposits.

Filing Early

And of course, one sure way to get your refund faster is to file early. The IRS will receive your tax return sooner so you can still beat the rush. Most taxpayers continue to wait until the deadline to file. When everyone files at the same time, it could take the IRS more time to send out the refunds.

2. Economic Stimulus Package

You may have heard talk about the Economic Stimulus Package recently passed into law. This plan will result in checks from $300 to $600 for individuals ($600 to $1,200 for joint filers) plus $300 for each qualifying child. In most cases, as long as you file your 2007 tax return you can just sit back and wait for your check to arrive in May (assuming you qualify).

However, Social Security recipients and recipients of certain Veterans’ and Railroad benefits, as well as low income worker who do not typically file taxes may have to file a 2007 tax return showing at least $3,000 in qualifying income to receive their stimulus payments.

Here is a sample form highlighting what must be completed to qualify for the stimulus payment: Form 1040A.

Here is detailed information from the IRS website: http://www.irs.gov/irs/article/0,,id=179096,00.html 

The IRS will start sending out notices to Social Security VA benefits recipients in late March.

3. Tax Credits

The IRS won’t claim your tax credits for you. If you are eligible to receive a tax credit you might have to do a little research and claim the credit on your return. Make sure you are eligible before making any claims because false information may cost you in the long run. Check out these tax credits and see if any apply to you:

Child Tax Credit

Parents may be eligible for a tax credit of up to $1,000 for each qualifying child under 17 years old. A qualifying child must be a US citizen, US national or resident of the US and must have lived with you for more than half of 2007.

For more information see Publication 972, Child Tax Credit.

Child and Dependent Care Credit

This tax credit is for taxpayers who have a spouse, child under 13 years old or another dependent who is “physically or mentally incapable of self-serve.” This credit may be worth up to 35% of the amount paid to a care provider if you paid someone to care for the dependent so you could look for work.

For more information see Publication 503, Child and Dependent Care Expenses.

Adoption Credit

Parents of adopted children may be eligible for a tax credit of up to $11,390 for each eligible adopted child.

For more information check out the instructions for Form 8839, Qualified Adoption Expenses.

Credit for the Elderly or the Disabled

This is a credit for individuals 65 years of age or older, or under 65 and retired on permanent and total disability. The taxpayer must be a US citizen or resident and there are income requirements.

For more information, check out Publication 524, Credit for the Elderly or the Disabled.

Retirement Savings Contribution Credit

Also known as the Savers Credit, this credit, which could be worth $1,000 for individuals, is for taxpayers who make eligible contributions to a qualified retirement plan such as an IRA or 401(k).

For more information, check out Publication 590, Individual Retirement Accounts.

Earned Income Tax Credit  

If you think you may be eligible for the Earned Income Tax Credit it could be worth up to $4,700.

You may be eligible if you earned less than:

  • $12,590 (or $14,590 if married filing jointly) and did not have qualifying children
  • $33,241 (or $35,241 if married filing jointly) and have one qualifying child, or
  • $37,783 (or $39,783 if married filing jointly) and have more than one qualifying child.

With one month to go, it might be time to get organized and moving on filing. The more complicated your situation, the more likely you are to encounter last minute questions. Do yourself a favor and file now.