Well Yip! Yip! Yahoo! Another year has passed and it’s time to file your tax return again. I’m sure that you are just overcome with emotion and excitement at the “fun” time ahead gathering all your records together and making that annual journey into the bowels of IRS instructions that seem to only make sense to seasoned IRS agents. Somebody once made a joke about a GPS unit giving directions like IRS instructions.
To arrive at your destination, you must A) Go Straight; or B) Turn Left; or C) Turn Right; or D) Go backwards…For purposes of arriving at your destination in A) above, you can either 1) Go Faster or 2) go slower. You are not allowed to stop. If you need B) above, you must use your left turn signal. If you don’t have one, then go to Publication 463 to understand your other options before proceeding further…
Now that I have reacquainted you with the “adventure” that awaits you, here are a few “TIPS” on Tax Credits that might sweeten the pot for you to consider.
Was anybody in your household a student in their first 4 years of higher education (above High School), and paid tuition in 2013? You may qualify to get a credit for as much as $2,500 to offset tax, or if you don’t owe any tax before the credit, $1,000 of this credit may qualify to be refunded to you anyway!
You should consider whether you are qualified for Earned Income Credit. Basically, it is only for folks who earned less than a certain amount (for example, Married Filing Joint-MFJ is $51,567) in 2013. Families with qualifying children (which means you can take them as a dependent on your return) may be eligible for up to $6,044 in a refundable credit. You must file a tax return in order to claim this credit.
Speaking of “qualifying children,” if you have any and they are still under 17 years old, you might be able to receive an additional Child Tax Credit of $1,000 per child. If you do not have enough tax to offset this credit against, some might even be available as a “refundable credit.” The “bad news” is that if you have MFJ Adjusted Gross Income over $110,000, this credit begins to phase out.
Want to get help from Uncle Sam in saving for your retirement? If your Adjusted Gross Income is less than $36,000 (MFJ) and you made at least a $4,000 contribution to an IRA (Individual Retirement Account), on top of reducing your taxable income by $4,000, you might be able to take a 50% “Savers Credit” against your tax owed. Maximum of $2,000. Assuming you are in the 10% tax bracket, that means you have a $4,000 contribution to an IRA that you only had to pay $1,600 out of your pocket for! It starts phasing out if your income is higher than $36,000. (Totally gone if your income is higher than $60,000.) NOTE: If you are filing differently than MFJ, the income limits and credits are smaller.
There are many other things to consider, but hopefully, this has whetted your appetite to start in on the gourmet event of preparing your 2013 tax return that awaits. Bon appétit! (PS You may want to turn off your GPS unit while preparing your return to avoid additional confusion.)
— Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at (775) 882-4459. You can also find him on the web at www.BullisAndCo.com and also on Facebook.