Now that the calendar page has turned from 2010 to 2011 – many minds are turning towards taxes.
Those W2s will be showing up in your mailbox before you know it and some of you overachievers will get right down to filing while the procrastinators put it off until the last minute. Even if you use software like TurboTax or go to a tax professional to help you file, it’s still smart to be aware of what’s new and improved for this tax season.
Thank You Captain Obvious!
The first place I went to look for tax tips was the good old IRS. The website has a list of the Top 10 Tax Time Tips.
These are actually pretty common sense tips – nothing mind-blowing or revolutionary here. The IRS just wants to remind you to start gathering all the documents you need, look for the W2s and 1099s in the mail and send your stuff out on time. The list tells you not to panic, make sure to review and encourages you to try e-filing your tax return and direct deposit for your refund checks.
Going Green and Getting Green!
Miranda Marquit of Moolanomy has a recent post about the Green Home Improvement Tax.
In 2009 and 2010 you could earn a tax credit of 30% of the cost of your eco-friendly remodeling. That includes projects like installing energy efficient windows, water heaters, furnaces and air conditioning systems – even putting in some new insulation.
Obviously, it’s a little late to make those changes for this tax season. However, if you plan on updating your home to help the environment in 2011, you’ll still get a tax credit – just a lot smaller.
It’s only up to 10% of the cost and is capped at $500 – but at least it’s something.
Cute Little Tax Credits!
G.E. Miller from 20-Something Finance reminds all his 20-something readers to take advantage of the 2010 Child Tax Credit. The credit has also been extended through 2011 and 2012. That’s why G.E. has been encouraging readers to “get it on.”
“So, for those of you planning on having your first or more children this year, it’s time to start pro-creatin’, or adopting, kidnapping, whatever means you need.”
Remember – kids count towards the credit even if they are stepchildren, adopted or pretty much any dependent living in your home that is under the age of 17. (Sorry that 27 year old deadbeat son staying in your basement and raiding your fridge doesn’t count)
You can claim a credit of up to $1,000 for each qualified child. G.E. explains that the child tax credit is subtracted from the taxes you actually owe – and not from your income.
Check out the IRS Child Tax Credit FAQ for answers to more questions.
Avoid Getting Audited!
Jim Wang over at Bargaineering.com has one of the more interesting tax tips I’ve run across so far. Jim recently wrote about How the IRS Picks Tax Returns to Audit. That’s always a scary thought – but Jim says don’t worry about it too much.
“The reality is that very few people get audited, just a couple percent each year, and some of them deserve it. As much as we may like to think of the IRS as some cruel, emotionless monster trying to make the lives of hardworking Americans as miserable as possible, they’re not. They’re trying to collect tax revenue so the government can continue to provide the services hardworking Americans need.”
Apparently Jim might also recommend kissing the IRS’s butt to avoid an audit. JUST KIDDING JIM!
Mr. Wang says the factors the IRS uses to determine who gets audited include:
- Computer Scoring – Two systems that look for red flags about connected to your tax return
- Information Matching – If what you put on your returns doesn’t match your W2s and 1099s…prepare to be audited
- Related Examinations – If you’re connected to some shady characters and they get audited, the IRS might be suspicious of you as well
- Potential participants in abusive tax avoidance transactions – Basically this means the IRS was tipped off that you were involved in some sort of scheme to get out of paying taxes.
Read more of what Jim has to say over at Bargaineering.com.
Another Top Ten List
Check out BankRate.coms 10 Tasty Tax Tips for 2011 and get prepared for next tax season. BankRate put together a nice list of things you can do throughout the year to benefit you next year.
There are some great reminders like Watch Out for FSA limits. Flexible spending accounts won’t be as flexible in 2011. That’s because most over the counter medicines won’t be eligible for reimbursement. They also recommend converting your retirement investment to a Roth IRA. That will mean no taxes are taken out when you withdraw the money in retirement.
There are also some tips that don’t apply to quite as wide of an audience. For instance – not everyone is going to run out and adopt a child. That’s actually No. 1 on the list because of the expanded adoption tax credit. And there probably won’t be a ton of people who want to start their own business in 2011 either.
But if you do plan to do either of those things in 2011 – make sure to stop by BankRate.com and read about the deductions.
Kasey Steinbrinck writes about personal finances and the economy for Check Advantage. The online company offers cheap checks including QuickBooks checks for small businesses. Contact Kasey to request free original content for you blog or website.