Tag Archives: Tax deduction

How Education Tax Credits Can Help You Get To College!

Many students are scared away from pursuing postsecondary education by the perception that they cannot afford it. It is important to know that the federal government is currently offering two different types of tax credits – The American Opportunity Credit and the Lifetime Learning Credit – that may help you to offset high education costs. Both of the available education tax credits pay for eligible expenses up to a given amount, including tuition, books and equipment or material fees.

The Lifetime Learning Credit is also good for up to $2,000 in credit each year, and covers not only degree-seeking students, but courses that are related to furthering one’s job opportunities. Unlike the American Opportunity Tax Credit, however, those who claim this credit are not eligible to receive a tax refund based on its use. In other words, you can only receive the maximum amount of tax that you owe.

Although many students do qualify for one of the two grants above, for those that do not, there is still the opportunity to take a tuition and fees deduction on your taxes. This can save you up to $4,000 in taxes. It is important to note that individuals may not claim both the tuition and fees tax deduction and either of the tax credits -the American Opportunity Tax Credit or the Lifetime Learning Credit – in the same tax year. It is, therefore, to your advantage, to consult with someone with knowledge in the area of tax law, or to conduct careful research on your own, to determine which of these options would be of the most benefit. The most important thing to remember is that there are numerous options to help students pay for postsecondary education. It just takes a little bit of legwork to find out where they are.

How to Choose a Tax Accountant for Your Business

While you may have been doing taxes on your own in the beginning, a growing business usually needs an accountant. Unfortunately, not all accountants are the same. While some may know a lot about your type of business, others may not. Then there’s the fact that some accountants may be too busy to work with you one on one. If you’re starting to feel overwhelmed, don’t. Here are a few tips on how to choose a tax accountant for your business.

Find an Accountant That Understands Your Business

There are many different fields of work out there and different accountants will understand different businesses. It’s important that you find an accountant that understands your business or you could risk missing several tax deductions. For example, if you’re a freelance writer, you can deduct things that others can’t, such as books bought for research. An accountant that doesn’t work with writers would try to tell you that this deduction isn’t legal. That’s why you must find an accountant that knows your line of work.

Choose an Accountant That Has Time for You

Accounting isn’t as easy as some accountants would lead you to believe. It takes several hours to complete difficult business forms. If your accountant doesn’t have time to meet with you one on one to discuss your taxes before and after preparing them, you should look for another accountant.

Opt for an Accountant with Experience

There are a number of classes that turn out tax preparers in a matter of weeks. However, when you’re dealing with complicated tax issues, you want to choose someone that has years of experience. Not having enough experience can result in you being audited or paying more than you were supposed to.

Select an Accountant That Uses the Latest Technology

Believe it or not, there are still a number of accountants that do taxes by hand. While there isn’t anything wrong with this method, it will take longer to receive your return. Opt for an accountant that uses the latest technology so that you receive your return quickly and know that the IRS has received your return.

Consider the Accountant’s Qualifications

There are a number of qualifications that an accountant can have. The best accountants will have a CPA along with other certifications, such as ABV (Accredited in Business Valuation). A CMA can prepare your taxes and has passed many exams, but they lack the education that a CPA has.

Seek Out an Accountant That Can Offer More Than Tax Returns

Obviously, tax returns are important, but a business has more accounting needs. You may need to pay estimated taxes or need help keeping financial statements. Either way, there’s a good chance you’ll need your accountant throughout the year rather than just on April 15.

A good business accountant is necessary for not only getting the best return on your taxes, but preparing financial statements. Take your time and choose an accountant that is right for your business.

About the Author: Patria Bigger is a tax advisor who enjoys working with small business owners. During tax season she offers free tax support to her family members and friends but she also recommends anyone who needs help seek the advice of a qualified accountant.

Unemployment Insurance Is Taxable

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2011 unemployment insurance benefits are taxable

Millions of Americans are without regular work despite a steadily dropping nationwide jobless rate. Being in this unenviable situation inheres a major tax implication: Unless federal income tax withholding was previously requested by the payee, unemployment insurance benefit recipients face an unwelcome surprise when calculating their 2012 taxes.

Previous Congressional exemption of the first $2,400 in unemployment insurance payments no longer exists. Although all 2011 unemployment benefits are taxable, other allowable deductions are available to offset out-of-work taxpayers‘ public pecuniary obligations.

The Earned Income Tax (“EIT”) credit may be claimed by taxpayers whose household compositions underwent major changes during 2011, for instance.

Those who returned to the classroom to pursue advanced education or enhanced professional skills development may be eligible for the American Opportunity Credit or one of many other educational tax deductions.

Internal Revenue Service (“IRS”) officials urge taxpayers to promptly file personal 2011 tax returns even if unable to pay their tax bill in full. Installment payments or negotiation settlements are popular options that help financially-strapped taxpayers avoid substantial penalties and additional interest for unpaid 2012 taxes.

Costs incurred in connection with ongoing job searches are also deductible. Examples include toll charges for long-distance calls, motel room rentals, stationery, and postage. All such associated job-hunting expenditures must have been made in an attempt to secure work in the same or a similar field as one’s previous occupation or profession.

Be sure to retain receipts and keep accurate records of all such expenses to avoid overpayment of 2012 taxes.