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‘Tis the Season for Giving to Charities:

In Accounting & Finances,Business,Taxes on December 20, 2014 by Sufen Wang

Tax Tips for Deducting Year-End Donations

Hopefully you’ve been spreading joy by supporting charities all year long. But if you’ve put off being altruistic since your New Year’s resolutions, now is the time to get in the giving spirit – if you want to deduct donations on your 2014 tax return. That’s because contributions are tax deductible in the year made. So as long as you give to a charity before 12:00 a.m. on 1/1/2015, it can be deducted for 2014 – no matter if the check is still in the mail or the unpaid credit card bill is burning a hole in the filing cabinet.

However, the IRS won’t just take your word for how nice you’ve been. Whether you donate $5, $500, or whatever amount of money, you must have a bank record or written document from the charity with the organization’s name, your contribution amount, and the date. Gifts of money can include cold hard cash, checks, electronic funds transfers, credit card charges, or even payroll deductions. Just remember to get a written record of such donation.

Maybe you can’t spare some change and instead want to donate clothing or household items. In general, those items must be in good used condition or better in order to be deductible. After all, if something isn’t good enough for you to use, it won’t be good enough for somebody else to use.

Once you drop off an armoire at the Goodwill or shell out money like it grows on trees to save a copse of Appalachian trees, you must get a written acknowledgment from the charity describing the items you contributed, among other things. You’ll need this record for any deductible donation of $250 or more, whether it’s money or property – and it’s in addition to the money documentation noted above.

All that being said, these donations must be made to “qualified” organizations. Only churches, synagogues, temples, mosques, government agencies, and anything which shows up on the Exempt Organizations Select Check have the IRS’ seal of approval. So although you might have splurged on gifts for yourself, you still don’t count as a qualified organization – no matter how often you call yourself a charity case.

You should feel special if you donate a car, boat, or airplane to charity. In fact, the IRS has special rules for these types of donations. If the claimed value is more than $500, the deduction for the vehicle is generally limited to the gross proceeds from its sale, and you’ll need a Form 1098-C or a similar statement, such as a Bill of Sale, from the organization to attach to your tax return; otherwise, you can only deduct $500 for that classic car of yours.

Individuals can only claim deductions for charitable contributions if they itemize their deductions on Form 1040 Schedule A. Of course, whether or not you end up deducting your donations, giving is something you should do year-round. And remember, “It’s not how much we give, but how much love we put into giving.”

Sufen Wang, M.S.Accountancy

www.sufenwang.com

Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Employee Health Cover Forms….

In Accounting & Finances,Business,Human Resources,Insurance & Liability,Taxes on December 2, 2014 by Sufen Wang

An Apple a Day Sure Doesn’t Keep Paperwork Away: IRS Releases Draft Employee Health Coverage Forms

With health care, comes a huge stack of forms to fill out – generally when you’re not feeling too well in a waiting room surrounded by folks who aren’t lookin’ too good either. Unfortunately, the IRS is adding to the paper stack with draft versions of Form 1094–B, Form 1095-B, Form 1094-C, and Form 1095-C.

Although these forms for reporting employee health coverage don’t have to be filled out in the ER lobby, employers will have to spend time completing several of them – which will take precious time away from business operations. And these forms arrive on the coat-tails of the already in-effect requirement for employers to report the cost of health insurance on Form W-2.

Where did this lovely paperwork come from? The Affordable Care Act requires that employee health plans meet certain requirements, with the reporting rules set by tax code sections 6055 and 6056. Down the road, employers with 50 or more full-time / full-time equivalent employees will be penalized if they don’t offer health coverage which meets minimum value and affordability standards.

To prove that everything is A-okay, employers will have the pleasure of filling out Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. Health insurance companies get to fill out Form 1094–B, Transmittal of Health Coverage Information Returns, and Form 1095-B, Health Coverage.

If it sounds confusing, it’s because it still is. Keep in mind that these are draft forms, with no instructions available yet. According to the IRS, “In accordance with the IRS’ normal process, these draft forms are being provided to help stakeholders, including employers, tax professionals and software providers, prepare for these new reporting provisions and to invite comments from them. The draft instructions relating to the forms were posted to IRS.gov in September. Both the forms and instructions will be finalized by the end of this year.” All this means that the paperwork still needs work in 2014, and thus reporting is voluntary, but there’s no avoiding it when it’s set in stone in 2015.

Sufen Wang, M.S.Accountancy

www.sufenwang.com

Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Thinking About Moving?

In Accounting & Finances,Business,Family,Taxes on October 14, 2014 by Sufen Wang

These State Tax Rates Will Make You Think Twice

Home is where the heart is. It’s also where you pay taxes. Before you go searching for greener pastures, check out this breakdown of some of the states with the highest tax rates in the nation.

A lot of folks spend their days California dreamin’, ready to head west and strike it rich in the nation’s most populous state. But living in the Golden State comes at a high price in the form of taxes. With the state income tax ranging from 1% to 13.3%, and the state sales tax currently at 7.5%, California life isn’t so easy on the pocket. Note that the 1% income tax rate is only fair game up to $7,582 for individuals and $15,164 for married joint filers; after that it just goes up and up and up. And remember, that sales tax is also just the minimum – when you look at local taxes in individual cities and counties, the sales tax can jump to as high as 10%.

Even worse, living in California means spending half the time living in a car, but residents don’t even get a break on driving-related taxes. CA has the highest annual vehicle license fee (VLF), along with the highest gas taxes in the United States, at 53 cents a gallon versus the national average of 31 cents. Furthermore, although Californians get a nice little break in property taxes with the first $7000 of the home’s value exempted, the property is so darn expensive in the first place, this little bit of tax relief doesn’t even make a dent. Traffic, a high cost of living, and expensive real estate – what more could you ask for?

California’s pretty bad, but the east coast has its fair share of tax-unfriendly states. New Jersey has the highest property taxes in the country, with the average tax amount on the state’s average home value of $348,300 coming in at $6,579. Connecticut is close behind with the second-highest property taxes, with the average tax on the state’s average home value of $291,200 at $4,738.

Connecticut’s gas taxes are also hot on the heels of California, at 49 cents per gallon, and although there are no local sales taxes, residents pay a state sales tax of 6.35% on most items. New Jerseyans have it lucky when it comes to gas taxes and fees, only paying 15 cents per gallon, but the 7% state sales tax coupled with additional taxes and fees in areas like Atlantic City, make it tough to survive in the Garden State.

New York, New York, big city of dreams…and the highest combined state and local taxes in the country. New York’s state income tax ranges from 4% to 8.82%, and although the state sales tax of 4% doesn’t sound too shabby, local jurisdictions tack on additional sales taxes from 3% to 4.75%. Smokers also are going to want to pick a different state – any state – other than New York to live in. The $4.35 tax on cigarettes is the highest in the nation, and New York City adds an extra $1.50 tax to each pack. Yikes!

Rhode Island is a tiny state with some pretty hefty tax rates. The 7% state sales tax applies to most items, including vehicles, and the Ocean State has the seventh-highest median real estate taxes. Maine is also up there – and not just in terms of geography. The Pine Tree State lowered the income tax from 8.5% to a maximum 7.95% last year, but single taxpayers only have to make $20,900 before they become eligible for that lovely tax rate prize. And Maine also charges an annual vehicle excise tax, which can run into the hundreds of dollars each year.

If you’re ready to abandon the first 48 and head off for a permanent tax vacation in Hawaii, maybe hold off on that one-way ticket. Hawaii’s gas taxes average around 48 cents a gallon, giving California a run for its money. Hawaii also has a top income tax rate of 11%, and pretty much everything other than prescription drugs is taxed – including services and food. Even California doesn’t tax its food! The good news is that Hawaii’s property taxes are low, with the median property tax on the state’s median home value of $517,600 coming in at $1,324.

Of course, all of these states have a lot to offer beyond high taxes. However, if you’re considering moving to save money, don’t forget to take into account the full gamut of each state’s taxes, from income, to sales, to property, to gas. Otherwise home sweet home could become home bittersweet home.

Sufen Wang, M.S.Accountancy

www.sufenwang.com

Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Get a Receipt!

In Accounting & Finances,Business,Taxes on September 9, 2014 by Sufen Wang

Help the BOE Fight Sales Suppression

From hackers to spammers to identity thieves, the digital frontier has its fair share of outlaws. Luckily most folks are becoming aware of such vulnerabilities in the electronic arena, and taking precautions to level the playing field. However, there’s one type of hybrid digital and brick and mortar crook who most taxpayers don’t even know exists – and so don’t even realize how they’re getting the short end of the stick.

These wizards, a.k.a. local business owners, use “zappers” (sales suppression software) to make sales transactions magically disappear and change in their electronic Point of Sale (POS) recordkeeping systems. They then under-report their taxable sales by making it look like they sold less than they actually did, and Presto!, they pay less taxes than they should. Due to these businesses waving their crooked wands, California gets cheated out of tax dollars used to make life run smoothly for all its residents. And this whole trick happens while other taxpayers pay their fair share of sales tax. So, they are not only cheating the State, but also rubbing you by keeping your tax money paid to them.

It’s obviously illegal to cook the books, and it’s harder to catch when it’s done electronically. However, the California State Board of Equalization (BOE) – the only publicly elected tax commission in the United States – are the go-to folks for identifying these tax criminals. The process is simple: undercover BOE auditors visit suspected businesses and buy merchandise. If they detect the use of zappers, the reported sales amounts is disregarded, and the BOE goes into full-blown audit mode, calculating sales based on things like cash to credit card payment ratios, purchase information obtained from suppliers, daily sales averages, etc.

However, BOE auditors can’t be everywhere at once – which means that everyday consumers will have to join the fight. It’s as simple as asking for a receipt when purchasing merchandise. Going paperless is great for the environment, but it also makes it easier for businesses to wipe that bag of chips you just bought right off the sales transaction map. Asking for a receipt, especially when you pay with cash, discourages dishonest businesses from fudging their electronic records and helps the BOE identify those businesses. After all, you’ve got the hard evidence in-hand – even if the snack you bought is already in your belly.

Anyone caught using illegal sales suppression software could go to jail, be fined, and have to pay all illegally withheld taxes owed, including penalties and interest. If you suspect sales evasion, save your receipt and contact the BOE’s Tax Evasion Hotline at 1-888-334-3300. Everybody has to play by the same set of rules, so help the BOE give these tax crooks what they deserve!

Sufen Wang, M.S.Accountancy

www.sufenwang.com

Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Raising the Minimum Wage Will…

In Accounting & Finances,Business,Human Resources on August 15, 2014 by Sufen Wang

Lead to Job Loss and Small Business Closures!

The raising of the minimum wage to $15.00 has been in the news a lot lately and I just have to put in my two cents on this matter. For reasons unknown, the media and the White House are not addressing the following issues when promoting a raise in the minimum wage:

1 – For every payroll dollar the employer dishes out, at least another 12 cents in out-of-pocket payroll expenses rides on that dollar’s coat tail. The employer has to match the employee’s Social Security and Medicare contribution, state employee training tax, state unemployment tax, and federal unemployment tax.

2 – For every employee hired on payroll, the employer has to pay insurance coverage accordingly. Worker’s Compensation Insurance and General Liability Insurance are both calculated based on gross payroll dollars, not to mention the now-mandated Health Insurance coverage.

3 – For every employee hired on payroll, the employer has to pay for additional office space, office supplies, computer and/or tool usage, and utilities.

The above are just a few costs of having an employee on payroll. Since our great nation is made up of small businesses, raising the minimum wage to $15.00 will force Mom-N-Pop shops to lay off employees, cut back employee hours, or worse, shut down all together.

I have a client who has owned a small hardware store for over 40 years. The most he can afford to pay his warehouse staff is between $10 to $13 hourly rates. And even with these rates, oftentimes when sales are slow, he will forfeit his paycheck to cover his employees – just so he can keep his staff in place.

Fast food places will be especially problematic. 99% of fast food restaurants are franchised and the franchisee does not make the millions mentioned in the media (such as the CEO of McDonald’s corporation). These franchisees pay heavy franchise fees based upon their gross sales – before any expenses and taxes. If the minimum wage is increased to $15/hour, they will have to cut down on staff, or worse, raise food prices. Pretty soon, fast food prices will be the same as a sit-down meal at your corner cafe; no more dollar-menus! The domino effect from raising the minimum wage to $15 is very scary and is a reality that this nation cannot handle. It will cause unemployment to rise and businesses to shut down.

My first job was flipping burgers at a video arcade in Downtown Los Angeles. I earned $1.40 an hour (lower than the mandated $2.00 an hour). However, I learned a lot of basic skills from that minimum wage job: how to take orders, how to follow orders, how to handle cash transactions, how to give good customer service, and how to clean up efficiently. I also knew that this burger-flipping job was not the final stop in my career.

The minimum wage law was initially put in place to protect and prevent any abuse in the workplace. It was not intended for an individual to stay at a minimum wage job and wait for the wages to increase, to be concurrent with the cost of living.

A minimum wage job is just a pit-stop along the career trip: a short pause for a worker to gather his bearings and acquire the skills needed to move forward to a better job, the next pit-stop, and so on and so forth. I picked up speed in the various trades I learned, as a burger-flipper and at other small part-time jobs, and I kept getting better and better at each pit-stop along my life track. And for each pit-stop along the way, I accumulated different useful skills to further my career. I have never thought about staying put at one job and waiting for the wages to rise to my liking.

The job market should be Laissez-faire, where supply and demand between private parties are free from government restrictions, tariffs, and subsidies, with only enough regulations to protect property rights. The market should be free to satisfy the supply and demand solely dependent on the current economic environment.

In summary, the minimum wage is not designed to feed a family of four. It is supposed to get the market to a starting point – the key word being “starting.” It is supposed to help an individual gain footing for employment, and then he should move onward and forward. It is not designed for an individual to stay put, and expect the minimum wage earning to keep up with his standard of living and family expansion, as he moves through his life cycle. It is, after all, called “Minimum Wage” not “Maximum Wage.”

Sufen Wang, M.S.Accountancy

www.sufenwang.com

Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Performance Reviews 101

In Accounting & Finances,Business,Human Resources on August 1, 2014 by Sufen Wang

What to Expect When You Have to Meet Expectations:

Congratulations – you just got hired. The boss shakes your hand, then heads off to do what important people do. You’re left with the HR person, who hands you a giant pack of papers, tells you to read them carefully, and then heads off to do what other important people do. You, of course, carefully read page 1 of the document, and then skim the rest until your eyes alight on the signature line on the last page. Done! Now you’re free to go get paid.

But somewhere in that packet was a blurb about undergoing a performance review after 60 or 90 or whatever amount of days on the job. It may seem far away on your first day of work, but the weeks pass quickly, and before you even know how to properly use the copy machine in the office, you’re up for a performance review.

Wikipedia defines a performance review as “a method by which the job performance of an employee is documented and evaluated. Performance appraisals are a part of career development and consist of regular reviews of employee performance within the organizations.” But that all probably sounds like the wording in the job packet you breezed through. So basically, a performance review is just that – a review of your performance as an employee. The constructive criticisms and suggested improvements within the review are supposed to advance your continued career path with the organization.

That means that a performance review should NEVER be a surprise to you. It should be used as a career development tool featuring comments on past performances, good and bad. The conclusion should focus on continuing good aspects of the performance, and recommend improvement tasks and goals for areas needing further enhancement. These suggestions may include additional education, such as certain classes or certifications, and specific tools to help your day-to-day on-the-job performance be more effective and efficient.

While the input of colleagues might be considered during your review, it’s your superiors who ultimately need to gauge how you’re doing. They’re the ones in charge for a reason. Above all, you should always know how you are doing at your job post. Your employer has a responsibility to guide your along your career and to end your performance review on a note of encouragement. After all, this will benefit both you and the people you work for!

Sufen Wang, M.S.Accountancy

www.sufenwang.com

Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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New Form 1023-EZ: Small Charities

In Accounting & Finances,Business,Taxes on July 27, 2014 by Sufen Wang

Easy, Breezy, Beautiful, New Form 1023-EZ: Small Charities Get a Streamlined 501(c)(3) Application

The saying “less is more” isn’t just true in terms of design. It also applies to the application small charities must fill out to receive tax-exempt status. In this case, less application pages to fill out = lessened IRS processing times = more small organizations approved more quickly = more resources available to process larger organizations’ applications. In other words, everybody wins.

The IRS released the new Form 1023-EZ on July 1 after taking into account critiques from the tax community and those working with charitable groups. Approximately 70% of all applicants qualify to take the easy road with this streamlined form, including most small organizations with gross receipts of $50,000 or less and assets of $250,000 or less. And the 1023-EZ really is A LOT shorter than the standard Form 1023 – 3 pages versus 26 pages.

IRS Commissioner John Koskinen explained that “this is a common-sense approach that will help reduce lengthy processing delays for small tax-exempt groups and ultimately larger organizations as well. The change cuts paperwork for these charitable groups and speeds application processing so they can focus on their important work.”

Before July 1, every charitable group had to wade through the same, dictionary-sized application, whether it was a “small soccer or gardening club or a major research organization.” Then all those groups had to stand around and tap their feet while they waited for the IRS itself to wade through the same dictionary-sized application and grant tax-exempt status. The result was not just tons of wasted time, but a backlog of 60,000 501(c)(3) applications, many of which have been pending for nine months.

The new three-page application should speed things up for the more petite charitable groups, making a dent in that backlog, and freeing up resources to review applications from the big organizations on the block (does the Tea Party ring a bell?). The only question is whether a significantly shorter 501(c)(3) application will result in compliance risks. After all, that’s the reason why that 26-page application was there in the first place.

But Koskinen stated that “we believe that many small organizations will be able to complete this form without creating major compliance risks. Rather than using large amounts of IRS resources up front reviewing complex applications during a lengthy process, we believe the streamlined form will allow us to devote more compliance activity on the back end to ensure groups are actually doing the charitable work they apply to do.”

The whole point of the new EZ form is for it to be fast and easy. Accordingly, the Form 1023-EZ must be filed online using pay.gov, and a $400 user fee is due at the time the form is submitted. The IRS recognizes more than a million 501(c)(3) organizations. Let’s hope this new form will lead to a million more charities being recognized – at a lot faster rate than before.

Sufen Wang, M.S.Accountancy

www.sufenwang.com

Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Get a Break with the Child and Dependent Care Credit

In Accounting & Finances,Business,Education,Family,Taxes on July 10, 2014 by Sufen Wang

The Endless Summer of Child Care:

It’s summer! No more waking up early, eating packed lunches, and doing more work once you get home…. Only if you’re a kid on summer vacation, that is…

If you’re an adult, chances are you still have to work, despite the fine weather beckoning you to the beach. And you also have to figure out how to keep the kids occupied for the next few months. Leaving them at home with a video game console, the microwave, and free time on their hands is probably not a good idea. However, you might consider placing them in daycare, having them go to summer camp each day, or getting a sitter at your house.

Those are very smart ideas not only because they give you peace of mind about the care of your child, but also because the costs of care may qualify for the Child and Dependent Care Credit, which can lower your taxes. The credit is up to 35% of the expenses you pay for care, depending on your income. You can receive maximum $3,000 credit yearly for the care of one qualifying person and $6,000 for two or more people. Although this credit isn’t just a summer tax benefit, this summer season is probably when you’ll be spending the most on child and dependent care.

The bad news is that you can’t get the credit for sending your child off to make smores and tell late night ghost stories at summer camp: overnight camp costs don’t qualify, along with summer school tutoring. Also, if you’re paying one of the older kids around the house (under age 19) to watch the young ‘uns, or having your spouse or other dependent take care of them, those costs won’t qualify either. And if you hired a sitter because you’re off to Vegas for some hot fun, you’re out of luck: to qualify for the Child and Dependent Care Credit, the expenses must be work-related – meaning that you paid for care in order to work or look for work. Of course, to get a tax credit, you must have earned income for that year, such as from wages, salaries and tips.

The good news is that expenses for the care of your dependent child/children under age 13 aren’t the only ones that qualify for this federal tax credit. Any married folks out there with a spouse who is going to school full-time needn’t be bitter that they have to sweat to bring home the bacon while their loved one gets to hit the books: expenses for your spouse’s care will qualify any month they are a full-time student. Expenses paid for care if your spouse is physically or mentally incapable of self-care will also qualify. You should remember that your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care.

Why do you need to remember that? Because if you’re married, you must file a joint return to get the credit and when you file a joint return, your spouse must also have earned income. No worries if you’re legally on bad terms with your once-significant other; spouses who are legally separated or living apart don’t have to file jointly.

As with anything, keep all your receipts and records. To claim the credit on your tax return, you’ll have to provide the name, address and Social Security number or employer identification number of the care provider. If this information is not available to you, you should consider seeking a more reputable source of care – both for safety reasons and so you can enjoy the Child and Dependent Care Credit.

Sufen Wang, M.S.Accountancy

www.sufenwang.com

Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Tax Returns Errors = Delay in Refunds

In Accounting & Finances,Business,Taxes on June 1, 2014 by Sufen Wang Tagged: earned income credit, irs, IRS e-file, Standard deduction, Tax credit, tax credits, tax refunds, Tax returns, taxes

Make No Mistake About It: Tax Return Errors Delay Refunds

Tax day has come and gone, and now you just have to wait. And wait and wait and wait and wait a second, what’s taking your refund so long? The delay might be due to a blooper on your tax return – the IRS will need to contact you to correct it. You’re more likely to make a mistake if you file on paper instead of IRS e-file – twenty times more likely in fact.

For example, you might have written in the wrong SSN or even forgot to put it at all. That’s usually the case – we forget the most important thing because we’re so focused on the little details. It’s okay to peek at your SSN card to make sure you got your own number right.

Everybody has crazy spellings of their names nowadays with silent consonants, extra vowels, and missing letters all over the place. Be sure to spell the names of everyone on your tax return exactly as they’re printed on their SSN cards.

Filing status might seem like a guessing game. A lot of folks accidentally file as Head of Household instead of as Single (the former does sound more impressive). Luckily, the Interactive Tax Assistant can give you a helping hand with filing status.

$OLYMPUS DIGITAL CAMERA$ Simple arithmetic gets complicated fast when a lot of numbers are involved. If you’re tempted to show that calculator who’s boss and do everything with the old noggin’, don’t. Math mistakes are a common error on tax returns, especially when you don’t have tax preparation software doing the calculations for you.

Read all the instructions. This goes for everything in life, but is especially important when it comes to baking, setting up expensive electronics, and figuring tax credits or deductions. A lot of filers botch up when figuring their EITC, Child and Dependent Care Credit, and the standard deduction.

Choosing direct deposit will get you your refund fastest. However, choosing direct deposit and using the wrong bank and account numbers on your return is a sure way to get your refund slower.

Whew, you made it through the tax return, double-checking your math and ensuring everyone’s names have all the extra letters they’re supposed to have. But all that work will be for nothing if you don’t put your John Hancock on there, along with the date. And go find your spouse if you’re filing jointly – the return isn’t valid unless both of you sign.

You can’t exactly sign with a pen when you’re filing electronically. Well I mean you can try to, but your computer screen won’t look too great afterwards. Instead, use a PIN to sign the return. If you know last year’s e-file PIN, use that. If not, enter the Adjusted Gross Income from your originally-filed 2012 federal tax return, but don’t use the AGI amount from an amended or IRS-corrected 2012 return.

To err is human – which is why it’s best to rely on IRS e-file in the future.

Sufen Wang, M.S.Accountancy

www.sufenwang.com

Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Lighten Your Tax Load:

In Accounting & Finances,Business,Taxes on June 1, 2014 by Sufen Wang Tagged: Earned Income Tax Credit, Internal Revenue Service, IRS tax forms, Tax

5 Credits to Reduce What You Owe

If you’ve been around for a couple of decades, you probably owe lots of people lots of different things. Some debts can be measured in dollars, while others can’t even be put into words, and many will never be paid off. We all keep moving down this uncertain river as best we can, trying to keep our feet from getting too wet. But owed taxes are cut and dry: pay them, on time, so you don’t get swamped. Tax credits help take a load off the amount of taxes you owe. And with some credits you may still get a refund, even if you owe no tax.

Write The Earned Income Tax Credit in permanent marker on the back of your hand. Then start filing your 2013 tax return. You don’t want to miss this refundable credit for people who work without earning a lot of moolah. The EITC can boost your refund by as much as $6,044. Eligibility depends on your income, filing status, and the number of children in your family, but single workers with no dependents may also qualify for the EITC.

Kids are lovely bundles of joy, but they’re also a lot of work. For each qualified child (under age 17 in 2013) you claim on your tax return, The Child Tax Credit can reduce the taxes you pay by up to $1,000. Then you can use that money saved to take everyone to Disneyland.

Speaking of work, a 9 to 5 job keeps rolling even when the little ones don’t have to go to school. (All this makes you wanna’ be a kid again, huh!?). The Child and Dependent Care Credit helps you offset the cost of daycare or day camp for children under age 13. But this credit isn’t just for kids – you might also be able to claim the costs of care for a disabled spouse or dependent.

The Saver’s Credit is strictly for those individuals who have their sights set on the future. No, this is not a tax credit for fortune tellers: the Saver’s Credit actually helps workers save for retirement. If you made $59,000 or less in 2013 and contributed to an IRA or retirement plan at work, you could be eligible for this one.

This credit’s been mentioned several times before, but important things bear repeating, and college students are especially important (just ask them). The American Opportunity Tax Credit helps you offset college costs and is available for four years of post-secondary education. It’s worth up to $2,500 per eligible student enrolled at least half time for at least one academic period. The only way you can get it is to file a tax return and complete Form 8863, Education Credits. What’s that noise? Oh it’s just the American Opportunity Tax Credit knocking – and it sounds like money.