It is that time of year again when we start preparing to file state and federal tax returns. Deductions offset income and help reduce the total amount of tax due. The more deductions that you can come up with will reduce the amount of tax and increase the available refund if any is due. For instance, if you are in a 15% tax bracket, each 100 dollars in deductions will save you 15 dollars in tax or produce for you 15 dollars more in refunds. If you no longer have many qualified deductions, you may come out better taking the standard deductions that IRS offers. This will simplify your return and you may be able to do one of these returns by yourself. You can go to www.irs.gov to download the income tax forms that you will need. Another source of income tax forms is your local library in Baldwin County.
There are also tax return volunteer groups providing Free tax preparation services in Baldwin and Mobile Counties. You can find out the sites by dialing 211 in both counties. Anyone who has $60,000 or less household income will qualify for this free tax preparation help. This group can also help you save part of your return refund.
Credits offset tax on a dollar for dollar basis so everyone needs to try and find tax credits that will qualify. Tax credits can really increase someone’s refund.
The Earned Income Tax Credit is also still available for low income families with children. The qualifying incomes for this credit change each year and the IRS web site can provide this information.
It would benefit everyone to look at the IRS web site to see what credits and deductions are available. If you have a printer, you can download and print several booklets that explain deductions and credits. If you find a significant deduction or credit that you were eligible for the past three years that you did not claim, you can file a form 1040X to claim these.
If you wind up owing IRS and cannot fully pay the tax by April 15th, you need to file the return on time anyway to prevent having to pay a penalty for not filing on time. The IRS web site will allow you to apply for a payment agreement if you cannot pay by the deadline. If you want to, you can apply for an extension on the deadline to file if you are not able to file by the deadline. The forms are available on the IRS web site.